B2B Partnerships

in Vietnam

An explanatory multiple case studies about upgrading of Vietnamese companies

in Danida B2B partnerships

MSc BLC, Business and Development Studies

Author: Signe Møller (xxxxxxxx)

Advisor: Assistant professor, Lotte Thomsen

Master thesis, Copenhagen Business School 2013

STU: 180.459

14/10 – 2013

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Table of Contents

Abstract………………………………………………………………………………………………………..1-2

Abbreviations………………………………………………………………………………………………......3

Chapter 1. Introduction…………………………………………………………………………..4-6

1.1: Structure of thesis………………………………………………………………………...6-7

Chapter 2. Theoretical Framework

2.1 Theory on upgrading…………………………………………………………………….8-11

2.2 Upgrading in software industry ………………………………………………............11

2.3 Upgrading in the plastic and mold making industry……………………...…..12

2.4 Theory on International Joint Ventures……………………………………….12-18

2.5 Chapter conclusion…………………………………………………………………….18-19

Chapter 3. Methodology

3.1 Delimitation……………………………………………………………………………….…...20

3.2 Philosophy of Science………………………………………………………………....20-21

3.3 Research approach……………………………………………………………….........21-22

3.4 Case Studies……………………………………………………………………………….22-23

3.5 Primary data………………………………………………………………………………23-25

3.6 Secondary data………………………………………………………………………………..25

3.7 Data reliability and validity……………………………………………………..….25-26

3.8 Chapter conclusion………………………………………………………………….….......26

Chapter 4. Background on Danida and the B2B programme

4.1 Private Sector Development……………………………………………………..…27-28

4.2 Danida’s PSD programme…………………………………………………………....28-29

4.3 Danida’s B2B programme…………………………………………………………....29-30

4.4 Chapter conclusion………………..…………………………………………………….…...30

Chapter 5. Background on Vietnam

5.1 History……………………………………….……………………………………………...31-32

5.2 The private sector…………………………….…………………………………………......32

5.3 FDI……………………………………………………….…………………………………….….32

5.4 Future challenges………………………………………………………………………..…..33

5.5 Learning and upgrading in Vietnamese IJV partnerships……………….….34

5.6 Chapter conclusion…………………………………………………………………...........35

Chapter 6. Analysis

6.1 Case 1. Software Industry. VN1 and DK1……………………………………..36-43

6.2 Case 2. Software Industry. VN2 and DK3………………………………………44-52

6.3 Case 3. Software Industry. VN3 and DK3………………………………….......52-59

6.4 Case 4. Plastic and Mold Making Industry. VN4 and DK4………............59-65

6.5 Case 5. Plastic and Mold Making Industry. VN5 and DK5………............65-71

Chapter 7. Discussion

7.1 Upgrading……………………………………………………………………………..………...72

7.2 Internal factors…………………………………………………………………….……73-77

7.3 External factors…………………………………………………………………….……77-79

7.4 Chapter conclusion…………………………………………………………………….79-81

7.4 Discussion in perspective of philosophy of science………………...…………81

Chapter 8. Conclusion

7.1 Recommendations………………………………………………………………………83-84

7.2 Limitations…………………………………………………………………………………...…84

7.3 Future perspectives……………………………………………………………………...…85

Bibliography……………………………………………………………………………………………...86-93

Appendix 1. List of Respondents and Informants………………………………………..……...94

Appendix 2-12: Interviews………………………………………………………………………....95-136

Appendix 13: Background on Danida………………………………………………………..………137

Appedix 14: The B2B programme in practice……………………………………………..138-139

1

Abstract

This study concerns the upgrading opportunities for Vietnamese companies in Danida B2B

partnerships in Vietnam. In a transition economy like Vietnam, many companies still lack

skills and technology required to upgrade and compete in a market economy. Therefore,

international joint ventures with foreign companies have been a common path to try to obtain

these skills through knowledge transfer. One of the visions behind Danida’s B2B program in

Vietnam has been for Danish companies to transfer technology and knowledge to local

companies. This study will look into some of these partnerships and try to explain how

different factors have influenced the upgrading of the Vietnamese companies. Derived from

past studies on knowledge transfer from IJVs, different internal factors within business

partnerships: Commitment, control, trust, conflict and absorptive capacity were suggested to

have an influence on knowledge transfer and upgrading. In addition, two external factors:

Vietnam and Danida are included. Policies and regulations from Danida and the Vietnamese

government were expected to have a possible influence on upgrading of the Vietnamese

companies, and therefore they were also included in the overall analysis.

This thesis has been built up on multiple case studies. 11 interviews, conducted with

Vietnamese and Danish companies from former or present B2B partnerships, have been

turned into 5 case studies. 3 of these cases take place within the software industry, and the

other 2 take place within the plastic and mold making industry. The study provides a number

of interesting indications to how the former mentioned internal and external factors have

influenced the upgrading of the Vietnamese companies. First of all, it seems as if it is difficult

for the Vietnamese companies to absorb the knowledge from the IJVs and implement it in

their own companies. Therefore, in the partnerships where no IJVs were established yet, all

training went directly to the Vietnamese company, which seemed to have learned a great deal

more than the companies where IJVs had been established early on. Therefore, commitment

was found to be important, but mainly when it not only involved commitment to the IJV, but

also to the Vietnamese partner. In addition, Product relatedness was found to be important,

especially when establishing IJVs, as related knowledge is easier to obtain and apply. In 2

partnerships where the Danish partners had the majority share, the Vietnamese partners

seemed unsatisfied with the partnership and did not seem to have benefitted much from

2

knowledge transfer. This might indicate that equally shared IJVs lead to more knowledge

transfer. However, as it was also found that many former B2B partnerships ended due to

disagreements in 50/50 partnerships, it does not seem to be the best way either. In the case

where a 50/50 shared IJV had been successful, trust was found to be an important factor.

Conflicts did not seem to have a direct negative effect on learning, but there were more

conflicts in the 2 partnerships where the Danish partners had the majority share. The study is

finished with some recommendations to Danida in Vietnam as well as to the Vietnamese

companies, and an encouragement of more studies about how companies in developing

countries can reach upgrading from partnerships and IJVs.

3

Abbreviations

B2B Business-to-Business

CEO Chief Executive Officer

CSR Corporate Social Responsibility

DAC Development Assistance Committee

DANIDA Danish International Development Agency

EU European Union

FDI Foreign Direct Investment

GDP Gross Domestic Product

GVC Global value Chain

IFU Investment fund for developing countries

IJV International Joint Ventures

OBM Original Brand Manufacturing

ODM Original Design Manufacturing

OEM Original Equipment Manufacturer

PSD Private Sector Development

SME Small and Medium Enterprises

WTO World Trade Organization

4

1. Introduction

Private sector development became the new central approach to development aid in the 90’s

with the underlying philosophy of “Central to development is economic growth and economic

growth is best achieved through the private sector”(Schulpen and Gibbon, 2001). This spurred

the birth of Danida’s PSD programme in 1993, which developed into the B2B programme in

2006. Danida’s B2B program aims to combine growth in the private sector with development

aid through business partnerships between Danish and developing country firms. The

developing country firms are expected to benefit from access to new technology and

knowledge, which may lead to upgrading of their business (Danida, 2010). This study aims to

investigate the upgrading of Vietnamese companies in Danida’s B2B partnerships and try to

explain how different factors influence the upgrading. Upgrading is of great importance to

developing country firms as it can lead to new market opportunities and higher profits. There

are different views on how partnerships between developed and developing country firms

can lead to upgrading. Some find partnerships such as IJVs to be key-mechanisms through

which technology and other knowledge can transfer between partners (Tsang et al. 2004)

while other researchers are more skeptical about the upgrading opportunities. Different

factors have been suggested to have an impact on knowledge transfer within IJVs and thereby

upgrading opportunities. This study will look at how different factors can influence the

upgrading of Vietnamese companies in B2B partnerships. This is a relatively under

researched area within studies on IJVs. While many former IJV studies have focused on what

factors influence IJV performance, relatively few studies have investigated how different IJV

factors affect the learning and upgrading of local companies. However, this area is of great

importance to companies in developing countries, who often establish IJVs with foreign

partners in the hope of upgrading through gaining new knowledge and technology. Upgrading

is especially important in a transition economy like Vietnam where many companies still lack

technology, managerial skills as well as marketing capabilities needed to compete in market

economies. Many Vietnamese companies have resorted to IJVs in order to gain these skills

(IBID). Out of 17 countries, Vietnam has been the country where most of Danida’s B2B

partnerships have taken place (Danida, 2010). The B2B programme has provided a chance for

some Vietnamese companies, which might have lacked resources to seek out a foreign partner

5

on their own (Danida, 2011b). This makes Vietnam an interesting study of upgrading in

Danida B2B partnerships. Vietnam has become a popular destination for foreign investment

as well as the 3rd largest receiver of development aid in the world (Kokko, 2011). Educated

low cost labor as well as a stable business environment has attracted many Danish companies

to apply for Danida partnerships in Vietnam (Schaumburg Müller, 2004). In addition, the

Vietnamese government has in recent years made foreign investment more attractive and

unrestricted compared to earlier. Danida’s B2B programme is interesting as it combines

development aid with private businesses. The programme has been criticized a lot over the

years for providing development aid in the hands of Danish companies. Therefore, it is

interesting to see if and how Vietnamese companies participating in the programme benefit

from upgrading.

This study draws upon former research on knowledge transfer within IJVs, and investigates

how the 5 internal factors of commitment, control, trust, conflict and absorptive capacity

influence upgrading within Danida B2B partnerships in Vietnam. Additionally, 2 external

factors will be investigated. Danida and the B2B programme will be considered an external

factor which might have influenced the upgrading of the partnerships as these companies are

submitted to follow the regulations and policies of the programme. On an even higher level,

Vietnam will also be considered an external factor which may have influenced the upgrading

of the companies through governmental policies and regulations, as this is the setting of the

partnerships. This provides this study with both a micro and macro perspective which aims to

ensure a broader perspective. This leads to the research question:

“How have different external and internal factors influenced upgrading of Vietnamese

companies in former and established Danida B2B Partnerships?”

This research question will be answered by utilizing existing theories and research on

knowledge transfer from IJVs, theory on company upgrading as well as background

information on Danida and the B2B program and on Vietnam. Existing theory on knowledge

transfer from IJVs will be utilized in order to analyze the B2B partnerships and explain how

internal factors in the partnerships influence the knowledge transfer and upgrading.

Background information on Danida and Vietnam will be utilized in order to explain how

upgrading of the Vietnamese companies is influenced by these external factors. This will lead

6

to an overall assessment of how these factors influence the upgrading of the Vietnamese

companies.

Having provided an overview of how this research question will be answered, an overview of

the structure of the entire research will now be provided.

1.1 Structure of thesis

In order to answer the research question, the research has been built up in the following way:

This first chapter has contained the introduction. The second chapter will contain the

theoretical framework which presents theory on upgrading as well as theory on knowledge

transfer in IJVs. Chapter 3 contains the methodology which outlines the methods used in this

study. In the 4th chapter information will be provided on Danida and the B2B program. The

5th chapter will provide background information on Vietnam as well as a brief overview on

former research on knowledge transfer and upgrading within IJVs in Vietnam. Thereafter,

chapter 6 will contain the analysis of how the Vietnamese companies have upgraded and

which factors that have influenced this. The analysis will be built up around 5 case studies

containing interviews with Danish and Vietnamese B2B partners as well as other relevant

informants. In addition, secondary sources in the shape of former research on this topic will

be utilized in order to increase the understanding of the cases. This will be followed by the 7th

chapter which leads to a discussion of findings from the analysis. Finally, chapter 8 will

provide a conclusion on this thesis and include a brief section on suggestions, limitations and

future perspectives. The next page will present this structure graphically in order to make it

easier to comprehend.

7

Theoretical framework

Theory on IJVs Theory on upgrading

Methodology

Upgrading in

software industry

Upgrading in the

plastic and mold

making industry

Danida and the B2B

programme Background on Vietnam

Analysis

Discussion

Conclusion

Recommendations

Limitations

Future perspectives

8

2. Theoretical framework

This chapter contains the theories and themes of which this study is based upon. The first

part concerns upgrading. It will first clarify upgrading overall and then lead to Humpfrey and

Schmitz framework on upgrading. Afterwards, a clarification of upgrading in the software and

plastic and mold making industries will be provided. The second part concerns knowledge

transfer and learning within IJVs. It consists of different theories on knowledge transfer in

IJVs, and the 5 internal factors of commitment, control, trust, conflict and absorptive capacity

will be presented.

2.1 Upgrading

This chapter clarifies different theories on upgrading which leads to an argumentation for

why Humpfrey and Schmitzs’ framework on upgrading has been chosen. This is both to

provide some background information on upgrading as well as to ensure that Humpfrey and

Schmitzs’ upgrading framework is the most suitable for this study.

Upgrading can simplified be defined as positive change in the performance of a company

(Hansen et al, 2006). The classic model of functional upgrading is the transition from OEM

(original equipment manufacturing) to ODM (Original design manufacturing) and OBM

(Original brand manufacturing) (Vind, 2007). A number of researchers have studied the

effects foreign companies can have on upgrading of developing country firms over the years.

Most research on upgrading has been in connection to global value chains (GVC). A GVC is the

range of activities involved in the design, production and marketing of a product taking place

across the world. By entering a GVC, developing country firms can gain access to new

technology and knowledge from the lead firm. This way the local company can upgrade from

mere assembling to OEM and ODM and eventually to OBM. Gereffi argues that many

companies in East Asia managed to upgrade from assembling in EPZ zones to OEM and in

some cases to OBM due to their involvement in GVC’s, which has been a great contribution to

their present success (Gereffi, 2003). Developing country firms upgrade from participating in

the GVC because they have to meet requirements such as product quality, delivery time,

efficiencies of processes, environmental and so forth which are imposed within the GVC

(Pietrobelli and Rabellotti, 2007). Gereffi views upgrading as a process for a company or an

9

entire economy to move into more skill-intensive, profitable and technological sophisticated

markets. Gereffi divides upgrading into 4 levels:

1) Within factories. Upgrading at this level means to move towards more expensive items,

from simple to complex products and from small to large orders.

2) Within inter-firm enterprise networks. Upgrading at this level involves moving from a

standardized mass production to a more flexible production of differentiated products.

3) Within local or national economies. Upgrading at this level involves moving from

simple assembly of imported products to own production and brand establishment.

4) Within regions. Upgrading at this level refers to the development of fully domestic

commodity chains which range from raw material supply to, production distribution

and consumption (Schmitz, 2004).

Other researcher are however more critical towards this approach. Schmitz and Knorringa

argue that entrance into GVC’s does not necessarily lead to upgrading for local firms. They

argue that the lead firms may put up hindrances towards transferring knowledge to the local

firms as marketing and design are part of their core competences which they wish to protect

(Schmitz and Knorringa, 2000). There have been found many examples of companies in Asia

upgrading from OEM to ODM, however upgrading to OBM is more difficult and occurs less

often (Sturgeon and Lester, 2003). However, Gereffi’s upgrading definition through the GVC

approach is not really fitting for this study where it concerns upgrading through IJV

partnerships, and Gereffi’s framework is also more fitting for talking about upgrading on a

country level.

Upgrading has also been connected with linkages by some researchers. These researchers

argue, that the stronger the linkages the higher the chance of upgrading. Therefore,

collaborate linkages such as alliances, joint ventures and so forth have been found to offer

good chances for upgrading, as companies operate closely together, compared to foreign

investment modes where no contact is established with local companies (Hansen et al, 2008).

The influence of linkages is however not of interest in this study as all the companies

participate in similar B2B partnerships. Unlike Gereffi, Humpfrey and Schmitz look at

upgrading merely from a company perspective. They divide upgrading into 4 different areas:

Process upgrading, product upgrading, functional upgrading and intersectoral upgrading.

10

Process upgrading refers to increasing the efficiency of the production process, for

instance through new technology.

Product upgrading refers to creating more sophisticated products with increased unit

value.

Functional upgrading refers to increased skill content in activities by for instance

introducing design or marketing to the functions, which can lead to upgrading from

OEM to ODM or OBM.

Intersectoral upgrading refers to expanding into new sectors based on particular

competences gained in the current sector.

The two first areas, product and process upgrading, have been found by other researchers to

occur more often than functional and intersectoral upgrading. Utilizing Humpfrey and

Schmitz’s framework, Hansen et al. found that Danish investors often helped upgrade

processes of local firms in order to secure cheaper and more efficient products. In addition,

they found local companies to often upgrade their products by moving into new and more

advanced product lines meeting the standards of the Danish company partners. However, in

regards to functional upgrading they found that Danish companies would rarely share core

competences in design and marketing with their local partners, which made functional

upgrading difficult. In addition, out of 54 cases in Vietnam, no examples were found where the

influence of a Danish partner led to sectoral upgrading (Hansen et al, 2006). In this study,

Humpfrey and Schmitz’s definition of upgrading will also be utilized as it provides a good

overall measurement of several ways in which a company can upgrade.

Limitations of upgrading

There are different views on how upgrading can lead to profitability of the firm. In Porter’s

view, upgrading is not sufficient if a company wants to increase its competitive advantage.

Instead, the company must perform activities different from their competitors or perform

different activities than their competitors (Schmitz, 2004). In addition, the new capabilities

companies gain must also be exploitable in the market they operate in. For instance, a

company can upgrade too much and thereby lose their market base. In addition, companies in

newly industrialized countries often encounter the “sandwich situation” where they get

trapped between more technology superior companies in more developed countries, and low

11

cost producers in less developed countries (Schmitz, 2004). This means that upgrading is not

always positive for developing country firms, which should also be taken into consideration.

The following two sections concern upgrading opportunities in the software and plastic and

mold making industries. This aims to provide an idea of what kind of upgrading that is

valuable and can be expected to occur in these two different industries.

2.2 Upgrading in the software industry

The software industry can be classified as an internet oriented chain. This type of chain

started to evolve in the 90’s and both include online sales, computers, internet equipment,

software and so forth. In each segment, the leading companies have dominant market shares.

For instance, Microsoft controls about 90% of the computer operating systems, which means

that they have a great influence on the type of software which is produced. The buyers in

these internet chains are both B2B and B2C where the B2B is by far the largest market

(Gereffi, 2001). The software industry is quite labor intensive, and the demand for IT workers

in developing countries has steadily increased over the years (Arora and Athreye, 2001). The

success of software development companies is quite dependent on the knowledge and skills

of employees and the extent to which they learn from projects over time (Solingen et al. 2000).

Therefore, upgrading in the software industry is dependent on human skill upgrading to a

large degree more than the transfer of technology, and one should look to the skill increase in

employees in order to measure upgrading. Upgrading in the software industry can mainly be

expected to take place within product and process upgrading regarding management of

projects, development of products and so forth. Functional upgrading is less likely to take

place as design and branding are not particular important features in the software industry.

Sectoral upgrading is also not expected to take place, but might take place if the partner offers

knowledge in a related area that could be profitable for the company to enter, such as for

instance entering the consulting business for software implementation etc. One of the issues

for upgrading in the software industry is that much of the outsourcing consists of small

projects with a low level of technological complexity, and these projects do usually not lead to

knowledge transfer and upgrading (Arora and Athreye, 2001).

12

2.3 Upgrading in the plastic and mold making industry

The plastic and mold making industry can be characterized as buyer driven. In buyer driven

chains large retailers and brand manufacturers setup decentralized production networks

across the world. These large companies mainly carry out design and marketing operations,

while most production is outsourced. Looking at the apparel industry, which is also buyer

driven, upgrading has been found to mainly be a shift from assembling to full package

production. However, there have also been cases of functional upgrading into ODM. Upgrading

into OBM has however been quite rare. The plastic and mold making industry is similar to the

apparel in the sense that it also is driven by large brand manufacturers often in consumer

goods (Gereffi, 2003). Upgrading in the plastic and mold making industry will most likely be

similar to the apparel with shifts from assembling to full packages as well as functional

upgrading from OEM to ODM to OBM. However, product upgrading and process upgrading is

probably most likely to take place to some degree as this is an easier transition. Sectoral

upgrading might also take place in this sector, but not often. New technology is important in

this sector which might lead to more efficient production or better and more sophisticated

products.

A theoretical background on upgrading has now been provided. This provides a tool to

analyze how the companies in the forthcoming cases have upgraded. However, theory on

factors which may influence the upgrading is still needed. Therefore, this next section

presents theory on IJVs in relation to knowledge transfer.

2.4 International Joint ventures

This chapter contains a theoretical background on IJV’s in relation to knowledge acquisition

and upgrading. IJV’s are an important part of Danida’s B2B program in Vietnam, which

contained a requirement of establishing IJV’s between the Danish and Vietnamese companies.

With the change from PSD to B2B in 2006, Danida implemented that only at least 25% locally

owned IJV’s could be supported in order to ensure that the Danish partner cooperates directly

with a local company (Danida, 2006a). This section will clarify the theory used on knowledge

transfer from IJVs. This plays an essential part in understanding the nature of IJV partnerships

as well as what kind of internal factors may influence the knowledge exchange between the

13

IJV partners. Knowledge transfer and learning from and within the IJV is very important for

this study as knowledge transfer is a prerequisite for upgrading.

Learning and knowledge sharing within IJV’s

“A joint venture occurs when two or more firms pool a portion of their resources within a

common legal organization”(Kogut, 1988). An International Joint venture (IJV) also involves at

least one of the headquarters of the partners is located outside the country of operation of the

entity (Ren et al, 2009). According to the knowledge based view, to be able to acquire and

manage knowledge is the most important strategic assets for a company (Anh et al, 2006).

IJVs can be a way to acquire this knowledge as it provides a platform for organizational

learning, where firms can gain access to new skills and capabilities from their partners (Tsang

et al. 2004). Therefore, one of the main purposes for developing country firms to create IJV’s

is to gain knowledge and technology from the foreign partner company. This knowledge can

be used to improve own strategies and operations in the local firm outside the IJV, which

makes it very valuable for upgrading (Inkpen, 1998).

Different factors have been suggested by researchers to influence the learning and knowledge

sharing within IJVs. However, no consensus has been made about what factors are most

influential. From prior research on knowledge sharing within IJVs the 5 different factors of

commitment, control, trust, conflict and absorptive capacity have been found to be important

and useful for investigating the upgrading of the Vietnamese companies in Danida B2B

partnerships. It should be noted however that this section has some limitations in its

reliability since it is put together by the findings of many different researchers, and not only

build on one theory or researcher. This makes it difficult to assess the reliability of each

source. However, when possible, findings are supported or opposed by other researchers. In

addition, since few studies have examined how different IJV factors influence the learning of

local companies, there are few researchers to draw experience from.

Commitment

Commitment to the IJV can be expressed by a long term interest in the partnership, as well as

a willingness to exert effort for the IJV. This can have an important influence on technology

14

transfer as well as capital and facility investment, as the partners are willing to commit

resources (Ren et al, 2009). Tsang et al. also find that commitment involves to proactively

seek out ways in which to transfer crucial knowledge to the local partner (Tsang et al, 2004).

Hau and Evangelista distinguish between partner assistance and knowledge protectionism.

Partner assistance refers to the degree of training the foreign company offers as well as the

degree of contact there is between foreign and local employees. Some researchers have found

the investment of human resources to have an especially positive effect on learning in IJV’s.

On the other hand, knowledge protectionism has the complete opposite effect. It refers to the

hindrances the foreign company may put up to avoid passing on knowledge to the local

company. The motive behind this is often a fear of losing competitive advantage by nurturing

a future competitor (Hau and Evangelista, 2006). Partner assistance may then indicate a high

level of commitment where knowledge protectionism indicates a low level of commitment. A

high degree of commitment might also reduce opportunistic behavior. Opportunistic behavior

occurs when one or both partners finds it advantageous to maximize own gains at the expense

of the joint venture. However, by increasing commitment by creating long time horizons for

the IJV and by frequent interactions between the partners the chance of opportunistic

behavior can be reduced (Parkhe, 1993). Commitment can also be related to survival as

longevity of the IJV may indicate how committed the partners are to the IJV. However, Hamel

argues that stability and longevity is not necessarily an appropriate measure of successful

IJV’s, as this could indicate a failure to learn from the other partner and not being able to be

independent (Hamel, 1991).

Control

Control may also influence the knowledge sharing between IJV partners. Control within the

IJV usually refers to the division of ownership. However, control can work on several levels

within IJVs whereas ownership division only being one of them. Makhija and Ganesh

distinguish between two types of control of the IJV; equity ownership and managerial control.

Equity ownership refers to amount of equity shares held and voting rights on the board.

Managerial control refers to the daily control of the IJV enforced by key personnel. Foreign

parents usually send expatriates from headquarters in order to achieve this (Makhija and

Ganesh, 1997). In addition, bargaining power exerts another way of control within the IJV.

15

Much research has been made on how equity control influences IJVs. Some researchers have

found that IJV’s where one partner is the dominant one are often more successful than equal

investments. This is mainly because partners shared control over the IJV can increase the

complexity of managing it which could reduce the effectiveness of the IJV (Zhang and

Rajagopalan, 2002). Other researchers however have found that shared ownership of IJV’s

lead to higher IJV performance (Rey et al. 2009). However, measuring IJV performance is not

within the scope of this study. Some researcher have found indications that control by either

parent can have some implications for the protection, transfer, and acquisition of knowledge

between partners in IJVs ( Inkpen and Beamish, 1997 and Makhija and Ganesh, 1997). Child

and Yan for instance find that parents who take strict control over the IJV are likely to get less

partner assistance in terms of market knowledge etc. (Child and Yan, 2003). Madhok also

argues that strict control can work against cooperation which can lead to less knowledge

sharing (Madhok, 1995). Complementary, Lyles and Salk found that IJVs with 50/50

ownership control had significantly higher levels of knowledge acquisition (Lyles and Salk,

2001). Bargaining power within the IJV depends on who possesses most capabilities as well as

who needs who the most (Hamel, 1991). Therefore it often influences the control of the IJV.

Yan and Gray have found that a parent company with more bargaining power tends to be able

to achieve its desired objectives as they can actively pursue their own strategic objectives

(Yan and Gray, 1994). Learning and knowledge transfer can however shift the bargaining

power. Hamel found that if one partner manages to out-learn the other partner they will be

less dependent and thereby increase their bargaining power (Hamel, 1991). Inkpen and

Beamish have found that IJV’s often becomes unstable or terminates when foreign partners

manage to acquire local market knowledge from their partner and change the bargaining

power (Inkpen and Beamish, 1997). On the other hand, Makhija and Ganesh argue that

although bringing more resources to the IJV provides a better bargaining power it also

provides less chances to gain resources, as the other partner will bring less (Makhija and

Ganesh, 1997). Therefore it is difficult to say whether it is most beneficial to be the partner

with more or less bargaining power.

16

Trust

Madhok argues that trust and relationship management is far more important to consider

within IJV’s over ownership and control. Instead of forcing decisions on the IJV through

majority ownership, better cooperation can be reached by building up trust with the other

partner and showing more flexibility in decision making (Madhok, 1995). Trust has been

found to be a very important factor for knowledge sharing in IJV’s by some researchers. Trust

is said to make the process of sharing technology easier as well as learning occurring from

interaction among colleagues (Tayeb, 2001). Lyles and Salk argue that trust has two

important dimensions when it comes to transfer of knowledge; a willingness to risk

vulnerability and confidence. The partners need a willingness to risk vulnerability in order to

transfer valuable information and they need confidence that the partner will not exploit this

vulnerability. Lyles and Salk argue that the willingness to risk vulnerability is a prerequisite

for entering a joint venture which means that confidence is most often the dimension which

needs to be built up (Lyles and Salk, 2001). Trust also reduces transaction costs because it

leads to less monitoring and specifications of contracts (Boersma et al, 2003). Boersma et al.

demonstrate how trust within IJV’s builds up in 4 faces: Previous history, negotiation phase,

commitment and execution. In the previous history stage trust is mainly based on reputation of

the other partner. In the negotiation phase the two partners try to develop an understanding

of each other and begin creating personal relationships. In the commitment phase the two

partners create legal written contracts, and in the execution phase friendships and

cooperative behavior will occur unless lack of competences or other issues lead to distrust

between the partners (IBID). Currall and Inkpen argue that the level of trust within an IJV can

be observed through: Open communication and information exchange, task coordination

between the partners, Informal agreements between the partners and so forth. On the other

side, surveillance and monitoring will indicate a low level of trust within the IJV (Currall and

Inkpen, 2002).

Conflict

Managing conflict within the IJV is of great concern as conflicts can lead to cooperation

challenges which may hinder the sharing of knowledge and technology (Julian, 2005). Tsang

et al. have found the intensity of conflict to have a direct negative effect on knowledge

17

acquisition (Tsang et al. 2004). In addition, Lyles and Salk have found that conflicts can be

reduced by a high level of technical support from the foreign partner (Lyles and Salk, 2001). A

common source of conflict concerns differences in decision making and management style.

Differences in these can be strongly influenced by cultural differences as well as goal

congruity. Cultural differences can create feelings of distance between the expatriates and

local employees which limits cooperation and knowledge transfer (Tsang et al, 2004). In

addition, a low level of goal clarity increases the chance of conflicts. When the objectives and

strategies of the IJV are clear, the partners can establish a common understanding, which

leads to fewer conflicts (IBID). Findings of Harrigan suggested that the more similarities there

are between IJV partners, the more likely they are to succeed. This not only involves cultural

similarities but also complementary missions, resource and managerial capabilities and so

forth (Harrigan, 1985). Swierczek finds that there are often great differences in the

management of conflict depending on cultural background which can lead to great issues in

conflict solving. For instance he finds Asian cultures to be more avoiding of conflict in general

whereas European cultures are in general more confrontational (Swierczek, 1994).

Absorptive capacity

In regards to acquiring knowledge within an IJV, absorptive capacity has been found to be an

important determinant for success. Absorptive capacity refers to the ability of a company to

integrate new knowledge into the company and eventually be able to translate it into

productivity growth (Narulla and Portelli, 2006). Absorptive capacity involves many

important dimensions such as prior knowledge and experience, learning intention and

objective, knowledge relatedness as well as learning intent and learning capacity, which all

determine how high the absorptive capacity is (Hau and Evangelista, 2006). Inkpen argues

that regarding prior knowledge, knowledge about the partner and knowledge about joint

venture management is of most importance. If the partners have prior experience with

working together they should have developed a basic understanding of each other as well as a

level of trust which can make the learning process easier. In addition, if the IJV partners have

prior experience with cooperating in joint ventures of any kind they will have developed a

range of collaborative experience, and will be more likely to appreciate the learning

opportunity (Inkpen, 1998). Another important part of absorptive capacity is product

relatedness. Product relatedness between the partners and what is produced in the IJV may

18

enhance the sharing of valuable knowledge. Cohen and Levinthal argue that learning

performance is better when the object of learning is related to what is already known (Xu and

Lu, 2007). Learning can be continuous through the IJV, but it is necessary that the partners

manage knowledge acquisition and integration into the firm’s knowledge base. In addition, it

is important to distinguish between operational and tacit knowledge. Where operational

knowledge can easily be transferred through written routines, tacit knowledge is often

forgotten and needs to be turned into operational knowledge as well (Tayeb, 2001).

Management knowledge is for instance considered much more difficult to transfer than

technology as it is influenced culturally and socially (Hau and Evangelista, 2007).

2.5 Chapter conclusion

This chapter first clarified theories on upgrading. First, different theories on upgrading were

presented which led to an argumentation of the use of Humpfrey and Schmitz’s framework.

The upgrading definition by Humpfrey and Schmith consist of the 4 levels of product, process,

functional and sectoral upgrading. This definition was found to be the most useful in this

study as it focus on upgrading at the company level. In addition, it was found by other

researchers that product and process upgrading is more likely to take place than functional

and sectoral upgrading. In the software industry, the skill increase in employees was found to

be of great importance and product and process upgrading most likely to take place. In the

plastic and mold making industry functional upgrading is more likely to also take place along

product and process upgrading, but often not further than full package production or own

design. In the second part of this chapter, theory on factors which influence knowledge

transfer in IJVs was presented. The first section presented 5 different internal factors in IJVs

which can influence the process of knowledge transfer and learning. Commitment was found

important for the investment of resources and expatriates. Control was found important as

the equity ownership may influence the degree of knowledge transfer. Trust was found to be

important as it may lead to more openness and increased cooperation which is important for

knowledge transfer. In addition, partners need trust in order to risk vulnerability in

transferring valuable information and technology. Conflict was found to be important as it

may have a negative effect on knowledge sharing. Especially differences in culture and goals

may increase conflicts. Lastly absorptive capacity was found to be important as different

19

factors such as prior knowledge, experience, learning intention, knowledge relatedness and so

forth can influence the degree to which a company is able to integrate new knowledge. These

5 different factors will be utilized to analyze how the upgrading of the Vietnamese companies

might have been influenced by these. Now that theory on upgrading has been clarified as well

as internal factors have been examined through the IJV theory, the next chapter will outline

the methodology of this study.

20

3. Methodology

In this chapter, it will be clarified how this study has been carried out and what methods have

been utilized. First, a delimitation of this study will be presented. Next, the overall philosophy

of science of this study will be clarified, and it will be assessed how it influences and

complements this study. Then, the research approach will be presented, which will clarify the

theories which have been used. This will be followed by a section on case studies, and the

strengths and weaknesses will be discussed. Lastly, it will be explained how empirical data

have been gathered and utilized, and to what extent their reliability and validity has been

ensured.

3.1 Delimitation

There are a number of delimitations to this study which will be outlined in this section. First

of all, this study will be limited to partnerships which have existed during the Danida B2B

partnership programme in Vietnam, which has run in the 5 years between 2006 and 2011.

Partnerships conducted before 2006 which have been transferred to the B2B programme may

also be included, but partnerships conducted during the 2011 partnership program are still

too new to gather any results from, so these have been excluded. In addition, the scope of the

B2B program will be limited to 2 industries. These are the software industry and the plastic

and mold making industry. Danida’s B2B partnership programme has many objectives and

aspects, but this study will be limited to investigate the upgrading of the Vietnamese partner

firms.

3.2 Philosophy of science

This study is based on critical realism (CR). The aim of CR is to explain the relationship

between experiences, events and mechanisms. Preliminary questions should ask of ‘how and

why’ a particular phenomenon came into being and end up with suggestions to the underlying

mechanics causing them to happen (Jeppesen, 2005). Critical realists in general support the

use of qualitative methods and case studies. The argument is that quantitative methods are

limited to look for repeating causal factors (Tao, 2013). CR finds that meaning has to be

understood. It cannot be measured or counted (Easton, 2010). In this study quantitative

21

methods could for instance be used to find causal relations between internal and external

factors and upgrading in the Vietnamese companies. However, it would according to CR

overlook the causal processes that explain the mechanisms of how these factors influence

upgrading (Tao, 2013). Therefore case studies and in depth interviews are accordingly with

CR suitable for examining and explaining mechanisms which lead to upgrading for

Vietnamese companies within B2B partnerships. CR makes the ontological assumption that

there is a reality but that it is difficult to apprehend. It is also acknowledged to some degree, in

line with the social constructivists, that the world is socially constructed. However, critical

realists argue that reality is not always socially constructed, and that sometimes reality

breaks through and is observable (Easton, 2010). CR distinguishes not only between the

world and our perception of it, but also between the real, the actual and the empirical. The

real is the realm of objects, their structure and powers. The actual is what happens if those

powers are activated. The empirical are experiences with either the real or actual and is the

only way to observe the reality. However, an important implication to CR is that social

systems always are open and usually complex. Therefore, the same causal powers can also

produce different outcomes as well as different causal mechanisms can produce the same

result. When looking back at changes and explaining them it is easy to think that it could only

have led to this result, however things can always happen differently. In open systems there

are many interacting structures and mechanism which leads to the risk of attributing to one

mechanism what was actually due to another (Sayer, 2000). For this study, which takes place

within a complex social system of companies, it means that it should be taken into

consideration that although it seems as if one factor resulted in an outcome of upgrading or

lack of upgrading within a Vietnamese company the reality could be something different, and

one should be open to more possibilities.

3.3 Research approach

This study undertakes the deductive way of reasoning, which means that existing theories are

applied to the empirical data (Saunders, 2009). In this study, former research and theories on

IJVs and upgrading will be utilized as theory. IJVs and upgrading are not actual theories, but

have been utilized as such as there is no existing theory covering upgrading in IJVs. Therefore,

the theoretical framework has been built up based on former research by different

22

researchers in these fields. From these theories different theoretical concepts have been

extracted. The first part concerns upgrading. Humpfrey and Schmitzs’ framework on

upgrading in companies was found most suitable for this study. This framework include the 4

levels of product, process, functional and sectoral upgrading. The second part concerns IJVs

and is covered by theoretical concepts concerning learning in IJVs. 5 concepts which have

been suggested by other researchers to influence learning from IJVs have been selected. These

consist of Commitment, control, Trust, Conflict and absorptive capacity. The theoretical

concepts from IJVs have been used as internal factors. In addition, following this methodology

chapter, two external factors of Danida and Vietnam will be presented. In this study, it has

been analyzed how these internal and external factors may have influenced the upgrading of

the Vietnamese companies.

3.4 Case studies

This study has been conducted as a multiple case study. A case study can be defined as: A

research method that involves investigating one or a small number of social entities or situations

about which data are collected using multiple sources of data and developing a holistic

description through an iterative research process (Easton, 2010). Case study fits well with the

critical realism approach as critical realism puts emphasis on understanding a phenomenon in

depth (IBID). A case study involves an empirical investigation of a particular phenomenon

within its real life context. A case study can provide a deeper understanding of the

phenomenon being investigated and provide more insight into the processes leading to

certain relations between variables. The difference between utilizing a single case study and

multiple ones is either to investigate a unique phenomenon occurring in one organization or

investigating several organizations in order to establish whether the same finings keep

occurring across all organizations. According to Yin, multiple case studies are usually to be

preferred over single case studies as they provide a better chance of establishing more

powerful results. Within case studies, there is distinguished between exploratory, descriptive

and explanatory case studies (Yin, 2003). This study can be categorized as an explanatory

case study. Explanatory case studies aims to explain how and why some events occurred. This

study aims to explain how different factors have influenced the upgrading in Vietnamese

companies in Danida B2B parterships.

23

Case study research is often criticized for being based on one or few cases which cannot be

generalized upon and thereby not contribute to scientific development (Flyvbjerg, 2006). Yin

argues that although the results of case studies will never be as strong as conducting a series

of scientific experiments, case studies can still show clues to possible cause-and-effect

relationships (Yin, 2003). In addition, Flyvbjerg argues that generalization on the basis of

large samples is overrated as the main source of scientific progress (Flybjerg, 2006). This

means that case study research can provide important contributions to their field of research

although they cannot be used for generalization. As there are few past and present B2B

partnerships to gather data from in this study, case studies with in depth interviews have

been found to lead to more information and reliable results than a quantitative study based

on few questionnaires. As for quantitative data, numbers on increase in employees have been

obtained from all Vietnamese company respondents. This aims to serve as a different way to

see if the companies have increased their performance which might indicate upgrading. This

makes this study a mixed method research, but predominately based on qualitative

techniques.

Empirical data

In this section, it will be clarified how and where the empirical data have been gathered and

how their reliability and validity have been ensured to the extent possible. The empirical data

consist of both primary and secondary data.

3.5 Primary data

The interviews

Primary data have been collected through semi-structured interviews1. A complete list of

themes and questions to be covered has been followed during the interviews, but some

questions have also been altered and new questions included. All interviews have been

conducted face-to-face or through phone or Skype. Interviews have not been recorded in

order to make people more relaxed and be more open to tell about their experiences. Instead

the interviews have been dictated during the interviews. The main advantages of semi-

1 See appendix 1-11 for an overview of the interviews

24

structured interviews is that questions can be adapted along the way as necessary, and the

interviewer can clarify, doubt and ensure that the questions and responses are properly

understood by repeating or rephrasing the questions or answers (Saunders, 2007).

The respondents

A number of 11 interviews have been conducted in total during a 3 month time span between

June and September 2013. This has turned into 5 case studies: 3 case studies concerning the

software industry, and 2 cases concerning the plastic and mold making industry. 5 of the

respondents interviewed have been from Danish partner companies, 5 have been from

Vietnamese partner companies and 1 has been a B2B program manager at the Danish

embassy in Vietnam. However, two of the Danish respondents are from companies where it

was not possible to establish contact to the Vietnamese partners. Therefore, these two

interviews will merely be used as additional information2, but not be used as individual cases.

In the two cases from the plastic and mold making industry it was not possible to setup

interviews with the Danish partners. However, the Vietnamese interviews are valued higher

than the Danish, as the Vietnamese companies are the primary center of the investigation, and

therefore those interviews were used for case studies. Interviews with Vietnamese partners

have both taken place in Hanoi and HCMC as there have been too few possibilities to only

focus on one area. In addition, all interviews with Vietnamese partners have consisted of face-

to-face interviews whereas interviews with Danish partners mainly have consisted of phone

interviews. Interviews with Danish respondents have been conducted in Danish in order to

make people talk as free and natural as possible without finding language to be a barrier.

Translation has been conducted to English afterwards. Interviews with Vietnamese

respondents have all been carried out in English as all the respondents have been fluent in

English. However, a local translator was assisting to call the Vietnamese companies and

establish contact to the relevant people involved in the program. Interviews have been

conducted with both the Danish and Vietnamese partners in the B2B partnerships to the

extent possible in order to gain views from both sides of the partnerships and avoid biased

research as much as possible. In addition, observations have been made of the local

2 See appendix 1 for a list of respondents and informants

25

companies in the extent to which it has been possible by visiting the companies and looking at

their production and so forth.

3.6 Secondary data

Secondary data have been collected from books, articles and web pages. Books and articles

have primarily been found through the CBS database which provides assurance that the

articles have been reviewed and published. However, the content of the articles have been

viewed with criticism and several views on the same topics have been taken into

consideration. Content from webpages has primarily been used in connection to Danida, as

content from webpages is considered less reliable than published articles and books.

3.7 Data reliability

When gathering the data it is important to ensure that they are reliable. Reliability refers to

whether the data will be similar if they were conducted at a different time, by a different

researcher and whether there is transparency in the way they are gathered (Saunders, 2009).

However, this can especially be difficult in qualitative research where the researcher aim to

understand the world based on the people in it. Merriam argues that human behavior never is

static and therefore replication of a qualitative research will never show the same results

(Merriam, 2005). However, one should still strive to get the most honest answers from

respondents. One of the main threats to reliability is participant error when for instance

conducting an interview or survey. It is important to establish trust in the interview so that

the participant does not fear that answers of negative character could have consequences for

his or her future work (Saunders, 2009). This has been intended in this study by promising

full anonymity to all respondents from the beginning of the contact phase. This has been done

in order to increase the participation rate as well as to create more openness in the interviews.

Danida’s B2B program has been under heavy critique from time to time which makes it a

sensitive matter for the Danish participants. As for the Vietnamese participants, anonymity

was given to ensure that they would speak openly about their Danish partner, Danida ‘s B2B

program as well as the Vietnamese government without fearing that it might reflect poorly on

them. Also, no recording devise has been used during the interviews in order to create a more

relaxed atmosphere and make the respondents feel safe. In addition, both existing and former

26

B2B partnerships have been used as cases in order to avoid the bias of only using “failed” or

“successful” partnerships as cases.

3.8 Data validity

It is also important to take validity into consideration. Validity refers to whether findings are

what they appear to be and whether the relationship between variables are causal

relationships. Validity may be threatened by recent changes in the object of the study which

does not match the overall picture (Saunders, 2009). One way to confirm the validity is to

utilize triangulation. In a case study, this can be done by utilizing multiple sources of data

(Tellis, 1997). In this study triangulation will be ensured by both using primary and

secondary data as well as both using quantitative and qualitative methods as mentioned

earlier.

3.9 Chapter conclusion

As this chapter has outlined, CR has been utilized as the philosophy of science in this study.

This philosophy complements this study as it supports the case study research and in depth

interviews. Limitations were found to the case study approach in the sense that it cannot be

used to make generalizations. However, it was found that case studies can still provide

important contributions to any field of research, and that the qualitative in depth method is

particularly useful for providing a deeper understanding of a phenomenon. In the empirical

data, 5 cases made from 11 semi-constructed interviews were presented. Reliability of these

empirical data was strived for to the degree possible by establishing trust during the

interviews through the promise of anonymity, as well as not using a recording devise. Validity

was strived for through triangulation. Now that the methodology of this study has been

outlined the next 2 chapters will provide a clarification of the external factors of Danida and

Vietnam.

27

4. Danida’s B2B program

This chapter will provide background information about Danida’s B2B program in order to

give the reader an understanding of the development and content of the program. This will

begin with a description of PSD as this is the underlying philosophy of the B2B program. It

will then continue to explain more detailed about the B2B program - its development, visions

and limitations. Danida is an important part of this study as all the companies involved have

been or are part of the B2B program led by Danida. Danida is therefore considered an external

factor which might have influenced the upgrading of the Vietnamese companies through their

program regulations and policies.

4.1 Private sector development

PSD is the ground philosophy behind development aid programs such as Danida’s B2B

programme. It is necessary to understand the ideas behind the program as well as the

limitations of it in order to reach the best understanding of it, and provide a background

framework. In addition, this section on PSD provides a macro view on the programs and

draws in greater theories on development aid overall.

PSD gained great attention in the 90’s as the new central approach to development aid. The

philosophy behind PSD originates from the general consensus in development thinking which

was reached in 1990’s and formulated by the World Bank: Central to development is economic

growth and economic growth is best achieved through the private sector (Schulpen & Gibbon,

2001). Multilateral organizations such as the World Bank, OECD, regional development banks

as well as many bilateral donors have been the main supporters of PSD. PSD is closely related

to the neo-liberal thinking and the Washington Consensus from the 90’s, which focused on the

failure of the state as well as promoting deregulation and financial liberalization. This led to

an increased focus on the importance of the development of the private sector (Schaumburg-

Müller, 2005). In 2000, when 189 countries signed up to the millennium goals, the focus of

development aid changed more to alleviation of poverty (Chotray and Hulme, 2007). This was

incorporated into PSD. In the UNDP report “Unleashing entrepreneurship” from 2004, UNDP

states that: “the private sector can alleviate poverty by contributing to economic growth, job

creation and poor people’s incomes”. (UNDP, 2004). PSD is still on the agenda in a recent report

28

from World Bank which takes a new stand on PSD with a focus on job creation. It argues that

as the private sector accounts for 90% of all jobs in the developing world this is the key

engine for job creation (World Bank, 2013).

Critique of PSD

PSD has been criticized profoundly over the years and especially when it involves B2B

partnerships with companies from the donor country. On an overall level, Schulpen and

Gibbon criticize PSD for having been too ambitious without a clear sequence of priorities,

which has made it unpractical. In addition, Schulpen and Gibbon criticize the PSD B2B

programs for being based on commercial interests of the donor country. They argue that these

programs contradict the recommendations of DAC which has argued that tied aid has negative

consequences for development aid efficiency (Schulpen and Gibbon, 2001). Langan supports

this statement. He sees the PSD activities of EU as a mean to justify their commercial self-

interest and liberalization agenda in developing countries (Langan, 2011). Estrup states that

there is no theoretical rational for PSD B2B partnerships and a lack of evidence for their

sustainable effect, but finds that donors ignore these facts and continue to support PSD

partnerships (Estrup, 2009). Finally, in their discussion paper on criticism of World Bank PSD

projects, Kinley and Davis also find that many of the PSD projects have been criticized for

their environmental, social and cultural damage in the local countries (Kinley and Davis,

2004). However, despite the great critique PDS has received over the years it still remains an

important part of the development agenda. Besides Denmark, many other countries such as

The Netherlands, Norway, Sweden and Canada also manage PSD programs involving B2B

partnerships (Schulpen and Gibbon, 2001).

4.2 Danida’s PSD programme

Danida’s 3PSD programme was established in 1993. The objectives of the PSD programme

were to support long-term partnerships between Danish companies and developing country

firms. In 1999 the objectives of the programme was expressed more broadly as contributing

to economic and social development in the recipient country by transferring technology and

3 Background information on Danida can be found in appendix 14

29

know-how, creating jobs, emphasizing environmental aspects and so forth. However, different

reviews of the program between 2001 and 2004 criticized the program for being too narrowly

focused on private businesses at the micro level when research suggested that interventions

at meso and macro level have more relevance. In addition, it was criticized for putting too

much focus on the interests on big Danish companies which were involved, as well as

encouraging Danish companies to get involved in high risk projects with too little

commitment, due to the great funding from Danida (Folke, 2009). Nevertheless, it was not

until 2005 when Danida’s PSD program was heavily criticized by the media that it led to a

reformation of the program. The PSD program then changed into the B2B program (Poulsen,

2005). However, projects were still conducted at the micro level through partnerships

(Danida, 2006a).

4.3 Danida’s B2B programme

With the B2B program was introduced much more explicit objectives and measurement tools.

Contributing to poverty alleviation was now seen as the overall objective. This was to be

achieved through promoting economic growth and social development in the partner

countries. The immediate objective was to create long-term partnerships between Danish and

developing partner country firms. Danida would support these partnerships financially in

order to ensure that a transfer of know-how and technology would take place within the

partnerships, which aimed to lead to an increase in the competitiveness of the local firm. The

intention with the B2B program was also both to improve the internationalization access of

the developing country firms and of the Danish companies. It was found that certification,

quality and sanitary standards created an obstacle for developing country firms which could

be improved by the influence of the Danish companies. At the same time, local market

knowledge from the local partner companies could benefit the Danish companies in their

market access as well as they could benefit from access to raw materials and cheaper

production costs (Danida, 2006a). In addition, more guidelines were introduced in the B2B

program such as there could only be provided support to IJVs of at least 25% local ownership.

In addition, increased monitoring and documentation of results were introduced (Folke,

2009). In the B2B program there was also an increased focus on employment and specifically

jobs for women, as well as more focus on environment and increasing information on HIV and

aids. What had been criticized in the PSD programme was also that projects should be based

30

on demands from the developing countries and not from the Danish participating companies.

However, it was and still is possible for companies from all kinds of industries to participate

in the program. (Danida, 2006a). There was also a requirement of additionally for the B2B

projects. This means that only projects which would not have occurred without support from

Danida, should be supported (Danida, 2006a). The B2B programme has also been under

attack from the media, but this time for letting down the Danish partner companies. In a list of

articles from Børsen in October 2012 the programme is accused of having forced Danish

companies into 50/50 joint ventures with Vietnamese partners. Some participating Danish

companies found it to be unfair since they brought technology and know-how into the

partnerships and have gave up on their partnerships as they found it impossible to cooperate

(Skouboe, 2012).4 In 2011 Danida’s B2B program was replaced again by the current Danida

Business partnership programme. The objectives of Danida’s business partnership

programme are similar to the B2B programme. However, there is an increased focus on

employment as well as on green innovation and CSR (Danida, 2011c).

4.4 Chapter conclusion

Through this chapter background information has been given on PSD and the B2B programme.

It has been clarified that Danida’s B2B programme has sprung out of the PSD programme and

the overall PSD philosophy of growth being best achieved through the private sector. PSD has

been criticized greatly over the years and especially programmes like Danida’s B2B

programme has been criticized for being unstructured and controlled by commercial self-

interests and so forth. The vision behind the B2B programme has been found to be poverty

alleviation through a strengthening of the competitiveness of local firms through technology

and knowledge transfer from Danish partner companies. At the same time, local market

knowledge from the local partner companies was supposed to benefit the Danish companies

in their market access. Through this background information it has now been clarified what

the underlying visions, philosophies and regulations are of the B2B programme. This will

serve to utilize Danida as an external factor which may influence upgrading in the B2B

partnerships along with an interview made with a Danida represent at the Danish embassy in

Vietnam.

4 A more detailed description on how the B2B programme is carried out can be found in appendix 15

31

5. Vietnam

This chapter will provide background information about Vietnam and the recent development

of the country. This serves to provide an understanding of the economic and political

landscape in the present Vietnam. This aims to improve the understanding of the nature of the

Vietnamese companies whose upgrading is examined, as well as the challenges they face. In

addition, the background on Vietnam will serve as an external factor, and its influence on

upgrading of the Vietnamese companies will be analyzed. As a final part of this chapter, some

former findings from other studies on knowledge transfer and upgrading in IJVs in Vietnam

will be presented. This will serve to find if there may be any characteristics which are specific

to IJVs in Vietnam, and which should be considered in the analysis.

5.1 History

Vietnam has had one of the most impressing development performances during the past 20

years. Between 1990 and 2010 the economy has grown on an annual rate of 7.3 percent,

which has led to great poverty reduction, as well as close to universal access to primary

school and health care (World Bank, 2011). The development of Vietnam is especially

impressing because of the crisis the country has been through with the mass destructions

during the Vietnam War (Schaumburg-Müller et al. 2009). With the Doi Moi economic reform

in 1986 Vietnam started to transform its economy from a centrally planned model to a

market-based one. The Doi Moi reform came as a result of the country’s faltering economic

growth and poverty. Private ownership of companies was now allowed among other things

(IBID). Following the fall of the Berlin wall and the disintegration with Soviet Union, 1989 was

also the year when the first law on foreign investment was introduced, and Vietnam started to

become more integrated in the global economy (Jenkins, 2004). Vietnam progressively

internationalized and entered new trade agreements; ASEAN in 1995, Trade agreement with

the US in 2000 and finally became a member of WTO in 2007 (Schaumburg-Müller et al, 2009).

Vietnam’s exports also changed remarkably. From only exporting about 10% of domestic

production in the 1980’s, it increased to about 25% in 1990 and to 50% in 2000 (Jenkins,

2004). Until 2010 the export rate nearly quadrupled and now almost accounts for 60% of GDP

(Kokko, 2011). At the same time there was a significant change in the content of exported

32

products. From mainly exporting agricultural products in the 1980’s it gradually changed to

include more unskilled labor extensive industries such as footwear and textiles. By the end of

the 90’s these industries accounted for almost 60% of exports. These new industries occurred

as a result of integrating more with the world economy. The main trading partners also

changed. From primarily trading with other socialist states, Japan and Korea became the main

trading partners. By the end of the 90’s Japan and Korea accounted for more than half of

Vietnam’s export (Jenkins, 2004).

5.2 The private sector

The private sector did not really start to emerge until the new century, when a new reform on

private firms was introduced. This reform, among other things made licensing procedures for

private firms much simpler (Kokko, 2011). However, despite of this development the private

sector in Vietnam is still underdeveloped due to discrimination between SOE’s and private

companies. Private companies have for instance more difficulties getting access to capital

which makes it difficult for them to expand. In addition, the Vietnamese government

encourages foreign companies to enter joint ventures with SOE’s, which makes it more

difficult for private owned companies to internationalize (Giroud, 2007). During 1988-1994

joint ventures in Vietnam accounted for over 70% of foreign investment and out of these 90%

were with SOE’s. (Kokko et al, 2003).

5.3 FDI

Since the Doi Moi reform, attracting FDI has been of major concern to the Vietnamese

government. FDI started growing in the beginning of the 90’s, but came to a halt with the East

Asian financial crisis in 1996 (Athukorala and Tien, 2012). It started growing again in 2001

and since 2006 there has been a major increase in FDI in Vietnam (Kokko, 2011). This was

especially due to a change in legislation allowing foreign companies complete freedom in their

choice of entry. Up until then foreign entry was almost fully restricted to joint ventures with

Vietnamese companies (Athukorala and Tien, 2012). Today, FDI nearly accounts for one fifth

of Vietnam’s GDP and more than half of total exports (Kokko, 2011). Vietnam’s FDI is mainly

concentrated in the urban areas of Hanoi and Saigon (OECD, 2009).

33

5.4 Future challenges

Vietnam is the 3rd largest receiver of development aid in the world only surpassed by Iraq and

Afghanistan (Kokko, 2011). Vietnam is a popular development aid receiver because it is

generally perceived as a good aid receiver which has shown great results in poverty reduction

(Kokko, 2011). However, Vietnam still faces great obstacles for the future. According to the

World Bank, Vietnam needs to create sustainable growth in the future. This is threatened by

the current resource intensive path with lack of diversification and value addition in export

products (World Bank, 2012). In addition, there is some concern that the many state-owned

businesses will not be competitive in the global economy, and the state sector is also being

criticized for making inefficient investments (Kokko, 2011). Ohno points out that most of the

growth in Vietnam has been due to global integration rather than internal strengths, and that

local firms are uncompetitive and institutions are weak. Ohno finds that Vietnam needs to

acquire skills and technology and not merely offer cheap labour and factory space. However,

the Vietnamese government has structural weaknesses in its policy making which leads to a

failure in creating these effective measures. Ohno finds the main issues to be that the policy

making process in Vietnam is closed within the government with no involvement from the

business community as well as the absence of coordination among the ministries on policies

(Ohno, 2009). Giroud also argues that some policies of the Vietnamese government have

influenced the degree to which Vietnamese companies have benefitted from foreign

investment. First of all, the opening up to foreign investment did not happen until the 90’s

which means that the Vietnamese companies have a short experience with FDI. In addition,

the private sector has developed slowly due to resources being dedicated to SOE’s. Therefore

private companies are often uncompetitive and unable to provide quality products, which

often make foreign companies purchase resources outside Vietnam. In addition, he points to

the lack of a national system of innovation which has led to lack of technology development

for local firms (Giroud, 2007). Another consequence to Vietnam’s former system of central

planning is that marketing skills are almost unknown having been reintroduced not many

years ago. This is one of the things which make it difficult for Vietnamese companies to

compete against foreign companies (Speece et al. 2003).

34

5.5 Learning and upgrading in Vietnamese IJV partnerships

Tsang et al. found, that with local firms in a transition economy, such as Vietnam, absorptive

capacity will often be low as they are accustomed to operate in a planned business

environment with scarce technological resources. Therefore, Tsang et al. found that the

foreign partner had to make a strong commitment to the IJV and proactively seek ways in

which to transfer crucial knowledge to their Vietnamese partner. (Tsang et al, 2004). Through

their research on IJV performance in Vietnam, Büchel and Thuy found that foreign managers

perceived to have learned more than their Vietnamese counterparts, and they were generally

more satisfied with the outcome of the IJV. In addition, the foreign partners were also the ones

who perceived to have learned the most from their foreign partner, which could be due to

greater absorptive capacity of the foreign managers (Büchel and Thuy, 2001). In addition,

Schaumburg Müller found that large Vietnamese companies usually had a larger absorptive

capacity than smaller ones, which makes the transfer of knowledge easier (Schaumburg

Müller, 2004). In addition, Anh et al. found that the more Vietnamese employees were

participating equally in IJV activities the more knowledge could be acquired from the foreign

parent. Participation in the IJV was both found to enhance the confidence of employees as well

as increase their motivation to acquire knowledge from expatriates in order to meet working

requirements (Anh et al, 2006). However, Schaumburg Müller and Pham found that local

Vietnamese managers in MNC subsidiaries learned more from their expatriate colleagues and

have higher learning intention than local Vietnamese managers in IJV’s. They found that this

might be due to the many conflicts and power struggles which can take place in IJV’s

(Schaumburg Müller and Pham, 2009). Tsang et al. also found that a high degree of trust and

minimization of conflict between partners had a great influence on the knowledge transfer

between partners in IJV’s in Vietnam. (Tsang et al, 2004). Accordingly, Thuy and Quang found

relational capital, defined as mutual trust, respect, understanding and close friendship

between individuals, to be of great importance (Thuy and Quang, 2005). Regarding upgrading

of Vietnamese companies, Schaumburg Müller found that the most common upgrading to take

place in Danish Vietnamese partnerships was product upgrading through the introduction of

new products, but found few examples of process and functional upgrading (Schaumburg-

Müller, 2004).

35

5.6 Chapter conclusion

Vietnam has had a remarkable development over the past 20 years with great economic

growth and poverty reduction as well as entering the global economy through trade

agreements and fewer restrictions on FDI. However, although restrictions on the private

sector have loosened up over the years there is still discrimination between SOE’s and private

companies. Private companies face more difficulties obtaining loans and FIE’s have often been

encouraged to enter IJV’s with SOE’s and so forth. This is one of the reasons why the private

sector has developed slowly, and that companies are often small and uncompetitive and

lacking access to technology. This can also explain why some former studies found

Vietnamese companies to often have a low absorptive capacity.

In the next chapter, it will be part of the analysis how these policies from the Vietnamese

government as well as the history of Vietnam could have influenced the upgrading of the

Vietnamese companies in the B2B partnerships. In addition, the former findings from other

studies in Vietnam will be included in order to support findings from this study.

36

6. Analysis

This chapter contains the analysis. The analysis will be conducted by applying the former

discussed theories on upgrading and international joint ventures as well as information on

Danida and Vietnam, to the empirical data. In each case, after a short introduction of the B2B

partners, the upgrading of the Vietnamese companies will be analyzed. This will be carried

out through the use of the upgrading framework as presented by Humpfrey and Schmith:

Process upgrading, product upgrading, functional upgrading and intersectoral upgrading. In

addition, upgrading will be measured quantitatively through increase in number of employees.

Secondly, the internal factors from theory on IJVs: Commitment, control, trust, conflict and

absorptive capacity as well as the two external factors of Danida and Vietnam and their

influence on the upgrading, will be analyzed. The analysis consist of 5 cases where the 3 first

belong to the software industry and the 2 second ones belong to the plastic and mold making

industry.

Software industry

6.1 Case 1: IJV between VN1 and DK1.

The Vietnamese partner VN1 was established in 2000. VN1 specializes in software

outsourcing. The main fields of activity of the company are SOA (Service oriented

architecture), BPM (Business process management), International Programming Services,

web application development, management consulting and information technology system

development. VN1 has cooperated with IBM since 2002 as a software outsourcing provider,

and has since then cooperated with many other companies including the joint venture with

DK1. The Danish company DK1 was established in 2005. It specializes in developing add on

products for Microsoft outlook. In 2008, VN1 and DK1 created a joint venture together with

an ownership division of 65/35, with the majority to the DK1. The Joint venture lasted for 3

years until it became fully owned by DK1 in 2011.

37

Upgrading

When asking VN1 regarding benefits from the IJV partnership, they answered:

“They shared some of the funds from Danida with us. Danida wanted the JV to be strong so our

company also needed to be strong. Therefore they gave us some of the funding to make it strong

too. This way we could send some people in management training” (Interview with VN1, 20135).

From this statement it seems that VN1 did not increase their production process directly due

to knowledge transfer from DK1. However, the effect from sending employees into

management training could have had a positive effect on the efficiency of production

processes in the company in the sense of increasing the skill content of the employees.

“We get very low rates from the domestic market and we hoped to get more international

projects. The partner said that the rate of engineers could be 150 USD per hour. In IBM it is only

50 USD per hour. Therefore we saw it as an excellent chance to enter the Danish market. First

year went very well. We got a few contracts which were 60-70 USD per hour.”(Interview with

VN1, 2013).

From this statement it also seems that the IJV has led to some degree of product upgrading as

VN1 obtained customers who provide a higher price for their services. However, as the

product itself did not necessarily improve it cannot be classified as an actual product

upgrading.

“For us and Vietnam it’s a great chance to get connections to businessmen in Denmark, to reach

high standards for your product and get an idea about what high standard is. But we never

made it to that part”(Interview with VN1, 2013).

All in all, it seems that VN1 might have reached a small degree of process upgrading. However,

the above statement indicates that VN1 never reached the degree of upgrading it could have

benefitted from. When asking the Danish partner DK1 regarding support of VN1 they

answered:

5 See appendix 2 for interview

38

“We had courses in cultural differences and English courses as well as a lot of social courses

concerning health and so forth. We followed all requirements from Danida”(Interview with DK1,

20136).

This training of employees has mainly involved the employees in the IJV, but some of the

employees from VN1 have also participated. The courses in cultural differences and English

could be a great advantage for future projects and cooperation with foreign and especially

European clients. In addition, the whole process of creating an IJV and cooperating with a

foreign partner also provides a great deal of increase in international experience and adds to

the overall knowledge of the company. VN1 will be better prepared for their next

international cooperation, and they will also look more attractive to foreign partners, as they

can see that VN1 has had prior experience with foreign partners. When asking the Danish

partner DK1 whether they have transferred technology they answer:

“Yes, a lot. The projects we had in foreign markets required special technology. We got the

Microsoft gold membership certificate and all employees were certified and have been to

Microsoft courses”(Interview with DK1, 2013).

This sounds very positive. However, again it is mainly beneficial for the IJV, where the

employees got certified, and the influence on VN1 is limited as they did not share employees.

When further asking DK1 how they think that VN1 has benefitted from the joint venture they

answer:

“I think they have gained a lot financially. They have received a lot of direct support from Danida

for education as well as travel to Denmark in order to gain greater understanding of cultural

differences. I do not know if they are doing better today”(Interview with DK1, 2013).

DK1 also seems to see limited benefits for VN1 besides the financial aspect. VN1 states that

they got all invested money back the first year and also made money on selling their shares to

DK1 in the end. Additionally, VN1 received funding from Danida. Financial benefits may have

benefitted VN1 in getting through the crisis or to have money for new investments which

could lead to further upgrading. However, initially a financial benefit is not worth as much as

6 See appendix 3 for interview

39

new technology, customers or other knowledge which can improve the business as these

benefits can lead to continuing and higher financial gains in the end.

Quantitative upgrading:

Regarding increase in employees, VN1 had about 180 employees before the IJV and reached as

many as 250 by 2010. In 2012 it had fallen again to approximately 200. This may suggest that

VN1 received more projects during the time of the IJV, which led to recruiting more

employees. This does not directly indicate that VN1 benefitted from the IJV and upgraded

their business. However, VN1 has continually been a successful company since the IJV so it is

also difficult to reject the possibility that part of the success is caused by the participation in

the IJV.

All in all, VN1 does not seem to have upgraded much from this partnership. Mainly, VN1 has

benefitted financially through receiving some of the funds from Danida as well as gaining

access to some higher priced customers in the beginning. However, VN1 does not seem to

have learned about any new processes etc. from DK1 which might have led to upgrading.

Employees in the IJV have obtained Microsoft certificates as well as training in CSR and

English, but VN1 does not seem to have benefitted from this either.

Internal factors

Learning and knowledge transfer from the IJV

Commitment

“We put money into it. I had to register with my own house because we needed an address in the

beginning. I helped to recruit a CEO and helped with the entire recruitment process. I helped

with the paperwork, questionnaires, English tests. Basically the whole process of creating a

startup in Vietnam (Interview with VN1, 2013).

VN1 has invested a lot in this IJV, which shows a high level of commitment. However, some

factors point towards a lack of commitment from DK1. DK1 did initially not want to send any

Danish employees to the IJV in Vietnam as they have done outsourcing for many years and did

not find it necessary. However, due to Danida’s requirements they ended up sending one. It

seems as if DK1 has gained a lot from the partnership in terms of gaining knowledge on how

40

to run a business in Vietnam. However, VN1 did receive money from Danida for management

training of some of their employees. In addition, employees at the IJV received Microsoft

certificate training among Danida CSR courses and English language training, which shows

some commitment from DK1. However, as VN1 and the IJV did not exchange employees VN1

did not benefit much from this. It does not seem as if DK1 has tried to protect knowledge from

VN1 to obtain, but they have also not helped to encourage it.

Control

“The ownership division was 65/35 with 65 to us. This worked really well. We covered most

expenses (Interview with DK1, 2013).

In the IJV between DK1 and VN1 the Danish partner DK1 had the majority share. This gave

them the power to make the final decisions, which ensured that disagreements on

management style and so forth would not be upheld by endless discussions among the two

partners. However, it might also be one of the reasons that VN1 has not gained a lot from the

partnership perhaps because they had very little power to influence the direction of the IJV to

their advantage. Bargaining power within the IJV depends on who needs who the most, and

the one with the least bargaining power is likely to reap the least share of the joint profit. If

you manage to out-learn the other partner you will be less dependent and thereby increase

your bargaining power (Hamel, 1991). In the case of VN1 and DK1, it is clear that DK1

possesses most bargaining power of the two. DK1 seems to have outlearned VN1 before VN1

has managed to gain much. DK1 has received assistance to setup an outsourcing branch in

Vietnam. VN1 on the other hand has not managed to gain as much from their Danish partner

apart from a few Danish contacts and financial gains.

Trust

“The Danish partner had used money to train people – up to 40 employees. It was difficult for us

to keep track of what the money was spent on. In the end there was only about 1000 USD left

“ (Interview with VN1, 2013).

Trust has often been pointed out as one of the most important factors for knowledge transfer

within IJVs as cooperation otherwise will be very difficult (Madhok, 1993). In the IJV between

DK1 and VN1 trust also seems to have played an important part. VN1 does not seem to have

41

trusted DK1 and how they spent the Danida funding. This could be because they were not

involved a lot in the management of the IJV. Currall and Inkpen argue that the level of trust

within an IJV can be observed through open communication and information etc. (Currall and

Inkpen, 2002). It seems as if DK1 has not shared much information with VN1 which could also

indicate that the level of trust was not so high between the two partners. In addition, VN1

complained about DK1 acquiring many of their customers and making these jobs internal

instead. This means that VN1 has not gained access to many new customers as they slowly

turned into customers of the IJV.

Conflict

“It was a problem to share marketing and to get sales and a problem with projects. The

intention from the Danish partner was to invest in low cost markets in order to benefit their own

company. They created a transition of the customers into internal jobs” (Interview with VN1,

2013).

The IJV between DK1 and VN1 ended due to great conflicts. VN1 seems to find that DK1

merely wanted to benefit their own company through the IJV. However, VN1 did not find that

much was done to expand the IJV and increase sales and projects. It seems to be mainly a

difference in goals which causes the conflict leading to an end of the partnership. A low level

of goal clarity can increase the chance of conflicts (Tsang et al, 2004). VN1 wanted to build a

strong IJV whereas DK1 seemed more interested in outsourcing jobs from their Danish

company. DK1 claims that their goal with the IJV changed due to the crisis. This seems to have

ruined their common understanding of the IJV. However, it does not seem as if the conflicts

have influenced the upgrading of VN1, but the transition into internal jobs and the lack of

sales in the IJV have decreased the upgrading opportunities for VN1 who wanted to build an

internationally strong company out of the IJV (Interview with VN1, 2013).

Absorptive capacity

DK1 has prior experience with IJV’s and VN1 does not. VN1 does however have some

experience with working with foreign partners from their cooperation with IBM. The

difference in prior experience suggests that DK1 have a higher absorptive capacity than VN1.

42

DK1 has setup outsourcing branches in foreign countries before so they have a clear method

of how to carry out this operation. This also means that they are less dependent on their

Vietnamese partner than a company without any prior experience would be which leads to

less cooperation and less bargaining power for VN1. If VN1 had more prior experience with

IJV’s they might have been better at negotiating terms of the IJV from the beginning, but also

making sure to integrate more knowledge into their company by sharing employees, taking

more part in management and so forth.

External factors

Danida and the B2B program

It was Danida which decided to provide some of the funding directly to VN1 which enabled

them to send some employees in management training. This management training seems to

be one of the only ways in which VN1 has benefitted in a way which might have led to

upgrading. This indicates that Danida has had a direct influence on the upgrading of VN1

which would not have taken place if this partnership had taken place outside of the Danida

B2B programme. Danida also required DK1 to send at least 1 Danish expatriate, which made

DK1 send one for 9 months. This could also have affected the upgrading of VN1 as they would

have closer direct contact with DK1. In addition, DK1 has carried out a lot of courses

concerning CSR and so forth which has taken place due to requirements from the Danida B2B

programme. However, these CSR courses only take place within the IJV and not directly in the

Vietnamese companies.

“I found the Danida program to be successful in some aspects, but a big failure in the intention.

For us and Vietnam it’s a great chance to get connections to business men in Denmark, to reach

high standards for your product and get an idea about what high standard is. But we never

made it to that part…I find that the program was not as good as intentionally designed”

(Interview with VN1, 2013).

The B2B programme has not lived up to the expectations of VN1. The programme has not

managed to ensure that VN1 benefitted from the partnership. The IJV has been successful in

the sense that it has created around 50 jobs and provided many of the employees with

43

Microsoft certificates. However, this does not seem to have benefitted VN1 in any other ways

than financially.

Vietnam

Policies from the Vietnamese government do not seem to have affected this partnership and

the upgrading of VN1 much. However, another external factor which has had a great influence

is the financial crisis.

“Many companies left due to the financial crisis. They wanted to maintain their business in

Denmark instead”( Interview with Danish embassy, 2013).

In the case of VN1 and DK1, VN1 changed their vision of the IJV due to the financial crisis

which seems to have ruined the partnership and perhaps future upgrading opportunities for

VN1.

Case conclusion

All in all, it seems as if many different internal factors have influenced the upgrading of VN1.

First of all, it does not seem as if VN1 is much involved in the IJV and with their 35%

ownership share they do not get much influence. This could also be the reason that VN1

shows a lack of trust towards DK1 as they don’t get to take much part in the management of

the IJV. VN1 express concern for how the money is spent within the IJV as well as towards

DK1 turning customers into internal jobs. However, it is mainly due to the change in goal for

the future of the IJV that VN1 ends the partnership. Due to the crisis DK1 can no longer afford

to expand the IJV as originally intended, but has to focus more on their main company. In

addition, the fact that VN1 does not exchange employees with the IJV also limits the changes

for knowledge transfer and learning. It also seems as if DK1 has a higher absorptive capacity

than VN1 due to their prior experience with IJV’s and outsourcing which could have limited

their dependence on VN1. Danida seems to have been a beneficial factor for the upgrading of

VN1 as they donated part of the funding for management training for VN1 as well as ensured

that DK1 sent an expatriate to the IJV.

44

6.2 Case 2: IJV between VN2 and DK2

The Vietnamese company VN2 specializes in the creation of TV commercials and 3D visual

effects. The Danish company DK2 was established in 2000 and is developing solutions in the

field of image processing, videos and websites for real estate agents. The IJV between DK2 and

VN2 was created in 2007 with a 75/25 ownership division with majority to DK2. By the end of

2009, DK2 had moved all their production from Denmark to the IJV in Vietnam. In 2012, VN2

sold their shares in the IJV to DK2, and the IJV became 100% owned by DK2.

Upgrading

When asking VN2 what they have gained from the IJV they answer:

“I think for VN2 it is more about the personal skills that our key employees have gained. It is

about experience. There has also been a lot of training within the IJV. Staff was sent to Denmark

for 1-2 weeks for training”(Interview with VN2, 20137).

The employees from VN2 who have been involved in the IJV have all gained new skills and

experience. It could be argued that this could lead to some degree of process upgrading as

these employees might have found new and better ways to manage different processes in VN2.

According to DK2, they have brought a lot of new knowledge into the IJV:

“Everything we do from 3D to image processing and slide show and so forth has been transferred

from DK2. We have provided all information on how to use it…We have trained 400-500

employees over the years due to turnaround of staff”(Interview with DK2, 2013).

DK2 has brought a lot of new techniques and knowledge to the IJV and trained a lot of

employees. It is however unclear to which degree the employees involved in both VN2 and the

IJV have been able to utilize this knew knowledge in VN2. According to VN2:

“Customers are very different between the two companies so it is difficult to apply the skills and

knowledge. You cannot just copy the business model or use skills learned in the IJV. Oversea

customers, such as the ones the IJV serves, request something flexible and high quality at low

price. If you work with the Vietnamese government they just spend money. They don’t care how

much it costs.….The IJV is like an island (an oasis) in Vietnam. Not many things are related to the

Vietnamese reality of doing business” (Interview with VN2, 2013).

7 See appendix 4 for interview

45

According to this statement, VN2 has not been able to benefit much from the partnership with

DK2. The main issue seems to be a difference in customers, but the problem also seem to be

that VN2 does not operate in the same kind of business as DK2. DK2 is focusing on a niche

market of real estate clients and create floor plans and image processing, while VN2 has a

more broad focus on graphics production. This has also had the consequence that very few

employees have been able to establishing new companies on their own based on the skills

acquired in the IJV. DK2 agrees on this view:

“Mr. D (one of the investors) has learned a great deal about how to build up a business and about

how to work with international partners. As a company it is limited how much they got out of it.

From the beginning it was meant to be completely separate from the local company and they

have not shared employees with each other. It was a bit difficult as they mainly worked in the

domestic market which was not ready for our products yet”(Interview with DK2, 20138).

According to DK2 “Mr.D” from VN2 has gained a lot of skills from the partnership, but VN2

itself has not benefitted much. Mr.D is still involved with VN2 through investor meetings once

a week so it is possible that his knowledge can lead the company in a better future direction.

In addition, Mr.D has started a new company in Vietnam where he intends to apply all the

knowledge he has gained from working in the IJV. When asking what kind of skills and

knowledge Mr.D himself has gained from working in the IJV he answers:

“Many things. It takes a lot of time to discuss and reach a consensus. In Vietnam we don’t do that

we just act.. So I learned about that. We also have to care more about the humans – CSR. You

need to invest a lot in training and development. I also learned that you should keep focus on the

core business. You get many opportunities, but should learn to keep focus. I am applying these

things to my new business”(Interview with VN2, 2013).

Although VN2 was not able to benefit much from the partnership with DK2, Mr.D has gained a

lot of new knowledge which may turn into a new successful Vietnamese company. This way

the partnership has led to some knowledge transfer. VN2 was however not satisfied with their

Danish partner:

8 See appendix 5 for interview

46

“We need a partner who knows more than us. Our partner did not have the skills to find new

customers”(Interview with VN2, 2013).

According to VN2, they ended the partnership due to a lack of learning opportunities from

their Danish partner. This confirms that VN2 did not benefit in many ways and did not

upgrade their business to a large degree. DK2 sees it a bit different however:

“DK2 brought in customers and technology so they have kind of had a free ride. They have not

have been able to have a lot of influence with their 35% share, but they have made money from

day 1. The real-estate market had dropped quite a lot when the Vietnamese partner decided to

leave and DK2 was hit hard by that crisis, however now 2 years later we are even stronger than

before the crisis. It was again a bit short time thinking of the Vietnamese partner to leave at that

time” (Interview with DK2, 2013).

VN2 agree that the IJV has been profitable, but not to an extreme degree. Although DK2 has

done most of the work in the IJV it has not been successful for VN2 to be part of the IJV. VN2

has not been able to apply the knowledge they have gained from the IJV and they have also

not established contact to foreign clients. All in all, VN2 has not experienced upgrading due to

the IJV, but some benefits from new knowledge may become useful in Mr.D’s new company.

Quantitative upgrading:

VN2 has about 30-40 employees during peak times. They even claim to have fewer employees

than before the partnership since many of their skilled employees left VN2 to support the IJV.

Few of these employees came back to VN2 afterwards. This means that VN2 might even have

been worse off with this partnership as they lost key employees with important knowledge

and experience without gaining new and useful knowledge.

Upgrading conclusion

All in all, VN2 does not seem to have benefitted much from the partnership. They might have

experienced some process upgrading due to skills that employees have gained from working

with the IJV, but VN2 and the IJV have not exchanged many employees. To some extent it

almost seems as if VN2 is worse off than before they started the IJV because they transferred

some of their key employees to the IJV. However, Mr.D has acquired many new skills from

47

working with the IJV which he will utilize in his new company. Hopefully this new company

will be able to upgrade further than VN2 based on this knowledge. However, Mr.D was not

able to implement the knowledge in VN2 as the customers and products differed too much

from each other.

Internal factors

Learning and knowledge transfer from the IJV

Commitment

The partnership between VN2 and DK2 lasted for 5 years. That shows a reasonable amount of

commitment. In addition, VN2 was asked to invest 300.000 USD in the IJV in the beginning in

order to show that they were serious and committed. In addition, VN2 transferred many of

their key employees to the IJV to make it successful. DK2 invested a lot of money in new

equipment and training etc. but also received the support from Danida. Both companies have

showed a serious commitment to the IJV since the beginning and it does not seem as if a lack

of commitment has caused the lack of upgrading for VN2 nor the end of their partnership.

However, as VN2 has slowly realized the only benefit for them was financially, as they found

themselves unable to apply the knowledge to VN2, they seem to have decided to withdraw

themselves while they could still make a profit from selling the shares.

DK2 has showed serious long-term commitment by introducing a great deal of CSR and

employee benefits in the IJV.

“We have had a CSR focus from day one. We wanted to go even further than the requirements

from Danida…We have set guidelines that 12% of employees should be handicapped and 40%

women. Most of our employees also come from outside Hanoi from rural provinces. They did not

have much education. We train them.”(Interview with DK2, 2013).

With this great focus on CSR, DK2 is building up a great image for the IJV which they would

not have done if they were not committed to continue it many years into the future. By hiring

employees, who do not have many other opportunities in the Vietnamese job market, they

may also obtain employees who are likely to stay loyal to their company. DK2 has provided a

lot of training to the IJV. They have conducted training of employees for about 1 year on

48

drawing floor plans and image processing and so forth. They have trained about 400-500

employees so far and employees can continually receive training through a bonus education

program as well as guidelines they can follow online. Some employees from VN2 have also

gained knowledge about these new processes and technologies, but have unfortunately not

been able to apply them to VN2.

“There are only 2 foreigners and 2 Danish trainees besides me (CEO). The trainees travel

between Denmark and Vietnam. Our manager of quality is Swedish”(Interview DK2, 2013).

The fact that the IJV has a Danish CEO as well as a Swedish manager of quality means that the

Vietnamese employees in the IJV have daily contact with the Danish employees. In addition,

Mr.D from VN2 was the manager of CSR in the IJV for many years so he also had a close

cooperation with the Danish CEO. This indicates a high degree of partner assistance from DK2,

and a chance to continually gain more knowledge.

Control

The IJV has an ownership division of 25/75 with a majority to DK2. This ownership division

seems to have worked out well as the IJV has run successfully since the beginning. There have

been many discussions between the two partners, but since DK2 has had the majority they

have had the final word. If the IJV consisted of a 50/50 ownership division the IJV might have

failed very early on as the partners had not been able to agree. However, it might also have led

to more upgrading for VN2, as some researchers have suggested that 50/50 shared

ownerships lead to more knowledge sharing. DK2 was able to get the majority share since

they bring more resources to the IJV and thereby have a higher bargaining power. Therefore

they also seems to have been able to benefit the most both financially and knowledge wise.

DK2 has managed to outsource all their production to Vietnam, which has reduced their

production costs enormously. In addition, they have gained knowledge about operating in the

Vietnamese market from VN2. VN2 did not have much bargaining power with their 25%

ownership, and perhaps therefore they could not do much to turn the IJV in a direction that

would benefit them more. It seems that at the point where VN2 decided to end the

partnership both partners had exchanged the knowledge they could, but only DK2 was able to

benefit from it as well as perhaps Mr.D’s new company.

49

Trust

It does not seem as if lack of trust has been a great issue in this partnership.

“The company went there and visited 10 companies. 1 stood out which was VN2. It was more the

chemistry between them than it was technical competences”(Interview with DK2, 2013).

The fact that the partnership has been based on chemistry between the two companies, more

than competencies, is likely to have increased the level of trust between the two partners, as

they may understand each other better. In addition, VN2 and the IJV have been located in

different areas run completely separately from each other as well as in different areas, which

may have increased the trust of the Danish partner. However, it might also have decreased the

chances of knowledge transfer for VN2. The IJV has also been partially managed both by DK2

and VN2 as the CEO has been Danish, while Mr.D has been managing the CSR department. This

way, both companies gained insight into daily operations, which might have enhanced trust

further.

Conflict

There has been a great deal of conflicts between VN2 and DK2.

”In Vietnam people are still hungering for success and are not patient enough to wait for the

investment to flourish….. It was difficult for us to accept that it was going so slow”(Interview

with VN2, 2013).

“Once the company started to make money the Vietnamese saw it as a profit to be spent right

away. In Denmark we see it more long term.”(Interview with DK2, 2013).

The speed of the development of the IJV has been a source of conflict between the two

partners. VN2 has expected the process to go faster, while DK2 has had more focus on

developing a sustainable and responsible IJV, with a great focus on CSR. This seems to be a

conflict based on differences in culture and management styles. In addition, there have been

conflicts due to different views on how to run the IJV financially. DK2 for instance wanted to

invest in apple computers to get high quality, whereas VN2 found the investment to be too

costly. However, as DK2 had the majority share they have been able to build the IJV largely

based on their ideas. It has also been a source of conflict that VN2 has not benefitted from the

partnership to the extent it expected to. VN2 has found their Danish partner to lack

50

knowledge in finding new customers. In addition, they have found the IJV to be of a different

world than Vietnamese companies and therefore difficult to apply the skills and knowledge

gained. According to VN2 it was this lack of learning from the Danish partner which made

them dissolve the partnership.

Absorptive capacity

VN2 has not been able to integrate much new knowledge into their company. However, it

seems that the employees who have been engaged in the IJV have gained a lot of new

knowledge, but they have not been able to apply it to VN2 as the business and the customers

are too different from each other. VN2 also has an American partner so they have some

experience with working with foreign clients, but no prior experience with IJV’s. The problem

for VN2 seems to be a lack of product relatedness. As Cohen and Levinthal argue, product

relatedness between the partners and what is produced in the IJV increases sharing of

knowledge and increases learning (Xu and Lu, 2007). DK2 and the IJV operate with image

processing and floor plans for the reel-estate market which is a limited niche market. VN2 on

the other hand create TV commercials and 3D visual effects, which is quite far from what is

created in the IJV. In addition, VN2 found their market of customers to be too different apart

to apply any customer management learning. However, Mr.D seems to have a high absorptive

capacity and he intends to use all the knowledge gained in his new company.

External factors

Danida and the B2B programme

When asking DK2 how Danida’s regulations and policies have affected their operations in

Vietnam they answer:

“It has been good. We have been lucky to get the 75/25. After we got this it was made into 50/50.

We did not have that problem”(Interview with DK2, 2013).

After DK2 started their IJV with VN2 the Danish embassy in Vietnam required many Danish

partners to enter into 50/50 ownership division IJV’s. Afterwards, many of these partnerships

dissolved due to difficulties in shared management. However, some partnerships managed to

survive 50/50 % ownership. An example is DK6 who hired full time Danish management in

51

the IJV and were able to manage it that way (Interview with DK6, 20139). However, it was still

a requirement from Danida that DK2 should enter into an IJV with their partner. If DK2 had

entered the market without the B2B program they might not have entered into a partnership

at all which means that Danida’s requirements have ensured that DK2 has created some

linkages in Vietnam.

Vietnam

When asking DK2 how policies and regulations from the Vietnamese government have

affected their operations in Vietnam, they answer:

“It is quite favorable for foreign companies here. It is easy to establish yourself and the rules are

clear and easy. We have not met much trouble. However, our company does not have any real

production as it is digital, which also makes a great difference”(Interview with DK2, 2013).

This answer shows that DK2 has not had many issues with the Vietnamese regulations. This

indicates that the Vietnamese government makes it attractive for foreign companies to enter

the Vietnamese market. This is positive for the upgrading of companies like VN2 as they

otherwise would have limited opportunities for knowledge and technology transfer from

outside companies.

Case conclusion

The partnership between DK2 and VN2 seems to have had a lot of conflicts. However, as DK2

has had a 75% ownership share they have made the final decisions, and the IJV managed to

exist for 5 years. This also seems to be one of the reasons that DK2 has had a greater deal of

bargaining power than VN2. DK2 has managed to outsource all its production to Vietnam,

which means that they have fulfilled their strategic ambition. VN2 on the other hand has not

gained access to new international customers, which were their ambition with entering the

IJV. If they had managed to gain access to foreign customers they could better have

implemented the knowledge gained from the IJV into VN2. Lack of product relatedness also

seems to have decreased the learning outcome for VN2. However, there seems to have been a

good mix of employees from DK2 and from VN2 in the IJV which is beneficial for sharing of

9 See appendix 11 for interview

52

knowledge. Unfortunately, many of these employees have not returned to work at VN2 and

the ones who did were not able to transfer the skills they had learned.

6.3 Case 3: Partnership between VN3 and DK3

VN3 was founded in 2008. VN3 provides outsourcing services across different industries and

support in building up and managing their IT systems. The Danish company DK3 was

founded in 2007 and manages IT outsourcing for Danish companies in Denmark, Ukraine and

Vietnam. The company has a focus on finding educated employees within Dot net and Java,

and focuses on different industries such as energy, finance, health care and so forth. DK3 and

VN3 started their cooperation through the Danida B2B program in 2010. Through DK3, VN3

provide services for the Danish market such as BPO, projects, data entry, graphics, data

validation and so forth. In the near future they will setup a joint venture together.

Upgrading

When asking VN3 how they feel they have benefitted from the partnership they answer:

“We had a project in Denmark in the health care sector for data entry. When we kicked off the

project our client came over and sometimes we sent an engineer for training in Denmark. We

also gained knowledge about the systems and processes. We also use these process systems in our

own company”(Interview with VN3, 201310).

VN3 has sent engineers for training in Denmark during projects. This has led to increased

knowledge on systems and processes for the company. This indicates that VN3 has upgraded

their processes and become more efficient due to increased knowledge on process systems. In

addition, VN3 has learned about scrum from DK3.

“We have gained knowledge about Scrum. The Danish partner shared their knowledge on this,

and Danida funded high value courses in Scrum for our company” (Interview with VN3, 2013).

Scrum is a branch of agile within IT where you test your product continually. In addition, you

communicate with the customer continually, and give them updates on the product. This way

the customer can provide feed-back earlier and avoid ending up with a different product than

10

See appendix 6 for interview

53

the customer wished for. The scrum process also involves evaluation of the process each time

you develop a new product for a customer (Interview with VN3, 2013). VN3 now applies scrum

to all their projects. This may not only have increased the efficiency of their production

process as mistakes will less likely occur, but also have increased the quality of the products

as the process is more controlled, and the product is continually tested. In addition, the scrum

process leads to increased contact between VN3 employees and their customers which could

improve their customer relations management, and increase their returning customers.

When asking DK3 how they have assisted VN3, they answer:

“We have trained VN3 in how to manage customer projects and how to recruit people and train

them. There has been a lot of knowledge transfer in that connection regarding BPO projects and

regarding new technology. It has been very wide.”(Interview with DK3, 201311).

Since VN3 and DK3 do not have an IJV yet VN3 has the responsibility of the employees

working on projects for DK3 in Vietnam. This has resulted in very close cooperation between

the two companies, and VN3 seems to have gained a lot of new knowledge regarding

processes, customer management and so forth. This might not have been the case if the IJV

had already been established and was run more separate from VN3. In addition, DK3 adds:

“There has also been a lot of training in new terminologies and use of language. You think that

BPO projects are so simple but it contains a lot more cultural things than you would expect. Take

for instance a plan over a house… There is a lot you need to learn.”.(Interview with DK3, 2013).

This sort of training is very specific and culturally determined so it is probably not the kind of

training that VN3 has benefitted much from. Nevertheless it provides the employees with a

broader understanding of how culturally embedded even small projects can be.

VN3 also seems to have upgraded a lot in more intangible knowledge areas:

“We also learned about the way to work with clients from our Danish partner – how they

think….We have also learned more about culture – both a different kind of working culture, but

also how to manage foreign clients” (Interview with VN3, 2013).

11

See appendix 7 for interview

54

VN3 has become better at managing clients and working with clients from abroad. This makes

VN3 more professional and better at satisfying customer needs. It could be argued that this

has led to some degree of functional upgrading as VN3 has increased their marketing skill

function. It can also be argued that VN3 has upgraded their products with the implementation

of new processes and better customer management. However, the price of their products does

not seem to have increased yet as one of their main functions is to provide cheaper

outsourcing solutions. However, as VN3 gain more and more competences and knowledge on

foot with European and American providers through this partnership, they will be able to

charge higher prices in the future.

“We also learned about CSR. First when we heard about this we did not care much for it. We

thought it was only something for Multinational corporations and governments. However, we

received funding for it and discussed CSR with managers from all around the world at an event

at the Danish embassy, and we learned that it involves more than we thought and also involves

our company”(Interview with VN3, 2013).

VN3 has learned more about soft company values which are important in the Western world,

and increasingly important in developing countries. By implementing CSR into their

organization VN3 becomes a more modern company, and it gives them a competitive

advantage against other Vietnamese companies. It makes VN3 more attractive for potential

partners as well as employees. Having a low employee turnover can be very profitable for

VN3 as they will maintain valuable knowledge and skills within the organization.

VN3 also finds that they have benefitted financially due to an increase in customers. VN3 is

however not completely satisfied with the number of new customers:

“The problem with our current partner is that it is a medium-sized company (In Denmark 4-5

people) they are too busy with day to day work and do not have enough time for marketing

efforts and developing the business. It takes too long time to acquire new clients, and we are not

quite satisfied with this yet”(Interview with VN3, 2013).

This indicates that VN3 finds that the development of the business could have been faster.

However, they seem to be very satisfied with the amount of knowledge they have gained from

the cooperation. When asking DK3 if they think VN3 is doing better today due to the

55

cooperation, they say that they find that the management would have done just as well either

way. In addition, DK3’s usual outsourcing model has not been a success in Vietnam due to the

language barrier between Vietnamese employees and Danish clients. This has had the

consequence that DK3 can no longer outsource large projects to Vietnam, but only smaller

BPO tasks as the daily communication with clients has turned out to not be possible

(Interview with DK3, 2013). This is naturally very unfortunate for the learning curve of VN3 as

they would gain a lot more from cooperating on large projects compared to small BPO tasks.

Quantitative upgrading:

VN3 have 12 employees who are working on the Danish projects. At peak time it can be up to

20. VN3 has about 150 employees in total. When the company started 5 years ago in 2008

they were only 8 employees. In 2009 it had grown to about 45 employees and since then

grown by about 25 employees per year. VN3 has clearly had success in a short time and is

benefitting directly from the partnership concerning number of employees.

Conclusion on upgrading

VN3 has benefitted from the partnership in many ways. They seem to have experienced both

process upgrading and product upgrading. This is especially due to the implementation of

scrum and from learning about project management and processes from DK3. In addition,

VN3 has learned about customer management and about servicing clients from abroad. It

seems as if VN3 is especially benefitting from not having established the IJV with DK3 yet as

VN3 is benefitting from having employees working on Danish projects in their office. This way

VN3 gains a lot more knowledge as they get to cooperate daily with DK3. VN3 also seems to be

successful with a great annual rise in employees.

Internal factors

Learning and knowledge transfer from the partnership

As VN3 and DK3 do not have an IJV yet the theory regarding IJV’s has some limitations for this

case. However, the partnership between VN3 and DK3 does have many similarities to an IJV

so IJV theory will still be applied to the degree to which it is possible.

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Commitment

As VN3 and DK3 have not established their IJV yet the level of commitment is not so visible

yet. Both partners seem however to be very involved in the partnership. DK3 has shown a lot

of commitment by training VN3 in many ways, and VN3 has shown a lot of commitment by

implementing a lot of knowledge gained from DK3. In addition, both partners have visited

each other’s companies several times. However, at this point the partners are still supported

by Danida, which may provide more incentive to maintain the partnership. The level of

commitment will be more visible when the funding has been used up. DK3 seems to have

provided a great deal of partner assistance to VN3, and does not seem to have been reluctant

to share their knowledge. In addition, the two partners seem to have daily contact to each

other.

“On day to day basis we email and Skype together with our Danish partner and make video

conference calls. We mainly use Skype. We agree on a work plan each day”(Interview with VN3,

2013).

This amount of daily contact between Danish and Vietnamese employees should increase

knowledge sharing further. In addition, the CEO and Vice president of DK3 have visited VN3

several times as well as employees from VN3 have gone to Denmark. However, the fact that

VN3 no longer participate in larger projects due to a language barrier does reduce the contact

between VN3 and Danish clients and the knowledge sharing becomes less sophisticated due

to smaller and simpler projects. This means that VN3 has probably gained the most

knowledge in the beginning of the partnership during training and larger projects, but from

now on the knowledge benefits will be remarkably reduced.

Control

DK3 seems to have more control than VN3 as they can decide on the projects to become

outsourced to VN3. As DK3 is using VN3 for low cost outsourcing to Danish clients is seems

that they are gaining profits, while VN3 is internalizing the skills of DK3 to the degree it is

possible. Therefore they seem to have an equal degree of bargaining power as they are both

dependent on each other, but at the same time neither of them is fully dependent on this

partnership as they both run other successful operations. It could be that VN3 will outlearn

57

DK3 in the future and no longer see any benefits of providing cheap outsourcing services, but

at the moment it seems that both partners are content with the benefits.

Trust

There seems to be a high degree of trust between VN3 and DK3. Neither of the partners seems

to fear a hidden agenda from the other partner. As Currall and Inkpen pointed out trust can be

identified in partnerships by the degree of open communication and information exchange as

well as task coordination between the partners (Currall and Inkpen, 2002). VN3 and DK3

coordinate tasks on a daily basis and communicate, which also indicates a high level of trust in

the partnership. This high level of trust could however also be due to the fact that they have

not established an IJV yet and the level of risk as well as level of commitment is not so high yet.

It could however also be due to the high level of prior experience that both partners have with

working with foreign partners which may to better communication and cooperation and

thereby trust.

Conflict

VN3 and DK3 do not seem to have had any great conflicts between them yet. One of the

reasons could again be due to their prior experience with working abroad, which might

decrease cultural gaps which could lead to conflicts. The main conflict in the partnership

seems to have been the language barrier between VN3 employees and Danish clients, which

has led to a change in strategy for DK3. This conflict could result in DK3 reducing its

commitment to the partnership as Vietnam has turned out to be less lucrative for them as an

outsourcing destination. In addition, VN3 seems to be unsatisfied with the speed in which DK3

is bringing them new clients. This could end up in a greater conflict in the future and an end of

the partnership.

Absorptive capacity

“I have an MBA degree and I used to work overseas in America and Canada. I have been in this

industry for 17 years. I used to run another company, but 5 years ago I started this company

with some friends” (Interview with VN3, 2013).

58

The management of VN3 all have long term experience with the software industry as well as

experience with working abroad. In addition, they all have more than 15 years of experience

in managing offshore operations for MNC’s. VN3 also has a partnership with an American

company (Interview with VN3, 2013). This amount of prior experience indicates that VN3 has

a high absorptive capacity which is also reflected in the many ways that they feel they have

benefitted from the partnership. In addition, DK3 has had prior experience with outsourcing

to Ukraine as well as prior experience with Vietnam. This is likely to have made the training

more efficient as well as made cooperation easier, as both partners have prior international

experience. In addition, product relatedness has been high as both companies have experience

with software outsourcing. In addition, DK3 has been able to outsource projects directly to

VN3 as well as transfer process systems to them, which also indicate high product relatedness.

External factors

Danida and the B2B programme

“I think the HIV programme is good for workers in factories who never finished college, but for

white collar workers like in our business, they already know these things. It was fun, but not so

helpful. Maybe training on how to sit when working with IT would have been better... I think the

programme should be more flexible in this.”(Interview with VN3, 2013).

VN3 finds that there are ways in which Danida’s requirements regarding CSR could be more

useful. This does indicate certain inflexibility in the program, and indicates that higher

flexibility from industry to industry could lead to more benefits and upgrading. However,

without the Danida requirements no CSR projects would have taken place in the partnership.

In addition, VN3 has participated at a CSR course at the embassy with people from all over the

world. In addition, Danida has funded the scrum course for VN3 which has been very

beneficial. However, it seems as if VN3 is benefitting from not having established the IJV yet as

they receive all the training directly in their company. Therefore Danida’s regulation on

establishing IJV’s might actually affect the upgrading of VN3 negatively in the future if all

Danish projects are moved to employees in the IJV.

59

Vietnam

“I think they do everything here in a more firm way. You need to know someone here who can

help you manage the political landscape”(Interview with DK3, 2013).

DK3 seems to find Vietnam to be a difficult country to do business in. This makes them more

dependent on their Vietnamese partner. This might affect the upgrading of VN3 as they get

more bargaining power in the partnership. DK3 might share more knowledge themselves as

they also benefit from VN3’s knowledge. However, it could also result in DK3 giving up on the

Vietnamese market.

Case conclusion

Many factors seem to influence the upgrading of VN3. First of all, DK3 seems to have provided

a great deal of partner assistance to VN3 through training. VN3 has benefitted directly from

this training as they have not established an IJV yet. In addition, VN3 seems to have a high

absorptive capacity due to the management’s great prior experience with the software

industry and working abroad. This seems to have improved their learning. One of the factors

which will reduce the chances for upgrading further for VN3 is cultural differences due to the

language barrier. The English level in VN3 has not been high enough to continue cooperating

on larger projects with DK3, which has clearly been the greatest learning experience for VN3.

As for Danida, they have funded a scrum course to VN3 which also seems to have influenced

their upgrading positively.

The Plastic and mold making industry:

6.4 Case 4. Partnership between VN4 and DK4

VN4 was founded 25 years ago in 1998 when the Vietnamese government decided that

Vietnam should focus on the plastic industry. VN4 mainly focuses on mold making and plastic

injection, but also produces flagpoles and embroidery. VN4 export 60% of their products and

sell 40% locally. In 2011, VN4 and DK4 started a partnership through Danida’s B2B program,

and now VN4 produces flagpoles for DK4. DK4 was founded in 1931 and has now outsourced

all production to Vietnam.

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Upgrading

When asking VN4 how they feel they have benefitted from the partnership, they answer that

they have learned many things, but most importantly they have gained new technology:

“We learned about new technology. We did not know how to make fiber glass before”(Interview

VN4, 201312).

VN4 has upgraded intersectoral as they have expanded into the new industry of flagpoles.

They have learned the technology of making glass fiber from DK4, which has expanded their

company into a new area. VN4 already had some experience in the area due to their

specialization in mold making, but has received the training required from DK4 to make high

quality flagpoles. VN4 ship 1 container of flagpoles to Denmark every month where DK4 sell it

to the Danish and nearby markets. This means that VN4 has a stable market for their flagpoles,

which makes it a good business for them. In addition, VN4 is the only company in Vietnam

which is able to produce the glass fiber, which makes it even more valuable. The new

technology of glass fiber has also opened up other possibilities for VN4:

“We are trying to enter the market for streetlight poles as this is the same technology as flag pole.

We are now collecting the documents required to be approved to make streetlight poles. We

hope to get it by the end of this year and start production next year. In the future, we also plan to

start producing wind mills as it is also the same technology” (Interview with VN4, 2013).

With a future production of street light poles and a vision to make wind mills, it seems as if

VN4 has benefitted greatly from the partnership and the new technology. However, VN4 also

believe that they have benefitted from more soft knowledge.

“As for marketing, we have learned more about doing business and marketing in Europe…. When

we visit Denmark we see how they introduce products into the market....We will also cooperate in

marketing in order to export to Australia and the US. We have to recruit more staff with good

English skills” (Interview VN4, 2013).

The increase in marketing skills suggests that VN4 has experienced functional upgrading for

their business. This is very valuable for when they wish to expand into new markets in the

12

See appendix 8 for interview

61

future. Additionally, VN4 answers that they have improved their administrative skills and

management skills. This might have led to process upgrading as the production processes may

have become more efficient.

“We had to modify our company in order to meet the Danish regulations and the requirements to

get ISO 9001 in order to produce the flagpole. This meant increased control of quality. In

addition we had to introduce CSR. Our employees have studied English, learned about health

care and protecting the environment, as well as safety of workers”( Interview VN4, 2013).

Due to the partnership with DK4, VN4 has been required to obtain ISO 9001:2008. This is very

beneficial for VN4 as it increases the whole quality level of the company, and improves their

attractiveness to foreign as well as domestic clients. One could argue that this has led to a

degree of product upgrading for VN4 as they now make higher quality products. The fact that

VN4 has had to introduce CSR and protect the environment and safety of employees is also

very beneficial to them. This prepares VN4 better for the future where CSR becomes more and

more important and makes them more attractive to foreign clients who seek responsible

partners and subcontractors. In addition, it makes VN4 more attractive to employees, which

may lead to a lower employee turnover as well as a lower risk of an employee getting into a

work related accident.

Quantitative upgrading

VN4 has about 210 employees and the number increases every year. In 2012 they had 140

employees, this year 210 and next year they predict to have 250. As for the employees making

flagpoles there are now 40. In 2012 there were only 12 so the number has increased. These 40

new employees making flagpoles is a direct result of the partnership with DK4, and it

indicates that VN4 has upgraded from the partnership.

Conclusion on upgrading

All in all, VN4 seems to have benefitted from the partnership in many different ways. First of

all, they have experienced a sectoral upgrading by entering the flagpole industry due to the

technology they have gained. In addition, they will expand further into the streetlight pole

62

industry in a near future, and perhaps the windmill industry in a more distant future. VN4

also seems to have experienced product upgrading due to the ISO 9001 they have gained,

which should lead to higher quality products. In addition, they seem to have upgraded

functionally to some extent as they have learned about marketing. In a near future, they may

gain even more knowledge about marketing as they will share marketing efforts with DK4 in

order to enter the Australian and American markets for flagpoles. Additionally, VN4 has

learned more about CSR and has applied it to their factories making it more attractive to

foreign clients and employees.

Internal factors

Learning and knowledge transfer from the partnership

Commitment

The two companies have not created an IJV, but merely a partnership where the Vietnamese

company has the responsibility of production and the Danish company has the responsibility

of sales and distribution. However, as the partnership has many similarities to an IJV, IJV

partnership theory will still be applied to the extent which it is possible, as in case 3. Both

companies seem very committed to this partnership. The Danish company has outsourced all

production in the hands of VN4. In addition, they have introduced CSR to VN4 as well as

required of them to obtain ISO 9001: 2008. At the same time, VN4 has built a new factory and

hired 40 employees only devoted to producing flagpoles, which means that both companies

have committed a lot to this partnership. DK4 has also provided a great level of partner

assistance to VN4 by training them in the technology of producing glass fiber. They have no

technology secrets towards VN4, as they need them to be equally skillful in producing the

flagpoles. They are also open towards shared marketing in the future, and teach VN4 how to

market the flagpoles in Denmark, so it does not seem as if they are trying to protect any

knowledge.

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Control

The two companies do not have an IJV with percentages of ownership, but they have still

divided their areas of responsibility. This seems to work very well for them as it reduces the

conflicts that may appear due to shared responsibilities. However, in the future they will

cooperate more on entering the markets in Australia and North America. This could lead to

more difficulties, but also more learning opportunities for VN4. It seems as if both companies

hold an equal amount of bargaining power. DK4 has invested resources in outsourcing their

production to VN4 so they hold a great interest in maintaining the partnership. VN4 has a

direct connection to the Northern European market for their flagpoles, as well as an

opportunity to expand to other markets and learn more about marketing abroad, so they also

have a great interest in maintaining the partnership.

Trust

VN4 finds that there is a good level of trust between them and their Danish partner:

“Yes. I think we have good separate responsibilities. In Vietnam we take care of production and

the Danish partner takes care of sales. We have a very good cooperation”(Interview with VN4,

2013).

The high level of trust seems to be due to the separate responsibilities. This clear division of

responsibility makes the cooperation easier and since it has worked out, the companies might

have started trusting each other more and more. In addition, there seems to be openness

about how the two companies will each benefit from the partnership:

“We are two separate companies. The target from our side is new technology and access to new

markets and administration. From the Danish side they get high quality fiber glass at cheap

price” (Interview with VN4, 2013).

Both companies have had clear visions for this partnership at the beginning, which seems to

have been fulfilled. The openness about visions and benefits could also be an important factor

for their high level of trust. This limits the speculations about whether the other partner tries

to take advantage of the partnership.

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Conflict

There does not seem to have been a lot of conflicts between the two partners. VN4 answers

that they had difficulties understanding each other in the beginning due to differences in

culture, but that they understand each other now. The fact that they did not establish an IJV,

but merely a partnership could have reduced the amount of conflicts. However, it took a while

before VN4 could produce flagpoles of good quality. In the beginning there were many defect

products. This could have led to some conflicts, but it does not seem as if it did. The Danish

partner still checks the quality of the flagpoles before each shipment. This also avoids the

conflict that could appear if a container with defect flagpoles went all the way to Denmark.

Absorptive capacity

VN4 has cooperated with a Japanese partner for many years since 2004. They gained

technology from them to produce fabric. This means that VN4 has many years of prior

experience with cooperating with foreign partners as well as experience with gaining

technology from a foreign partner. This has most likely increased the absorptive capacity of

VN4, and made the process of integrating new technology easier. In addition, it has been a

proof for DK4 that VN4 could be a reliable and stable partner, which might have increased the

level of trust between them.

External factors

Danida and the B2B programme

VN4 says that they have improved skills in reporting because they had to report to Danida. In

addition, they have introduced CSR in their company as a requirement from Danida. As argued

before, introducing CSR to their company can make it more attractive to foreign clients and

employees, which is also a sort of upgrading.

Vietnam

Vietnamese policies and regulations do not seem to have had a great impact on the upgrading

of VN4.

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Case conclusion

Many different factors seem to have influenced the upgrading of VN4. First of all, the two

companies have not created an IJV, which seems to have benefitted the upgrading of VN4 as

they now benefit directly from all the knowledge. If they had established an IJV, VN4 would

never have undergone the same changes of their company such as obtaining ISO 9001 and

implementing CSR, as all these activities would have taken place within the IJV. In addition,

the distinct division of responsibilities between the two partners seems to have led to greater

cooperation between them with few conflicts, and a high level of trust. In addition, there

seems to have been clear visions and openness since the beginning about the benefits for each

partner, which might also have increased trust and cooperation. More importantly, VN4

seems to have a high absorptive capacity as they have cooperated with a Japanese partner for

many years, and received technology from them. At the same time, DK4 has provided a high

degree of partner assistance. They have invited VN4 to Denmark from time to time and taught

them all angles of the flagpole industry.

5.6 Case 5: IJV between VN5 and DK5

VN5 was established in HCMC 25 years ago. VN5 specializes in mold making and plastic

production. 90% of their customers are international and 10% are domestic. DK5 also

specialized in mold making and plastic production. In 2003, VN5 and DK5 established an IJV,

which has now existed for 10 years. The IJV only specializes in mold making. Next year the IJV

will get a second factory. In 2011, DK5 was declared bankrupt, but the IJV was unaffected by

this. The owner of former DK5 continued the partnership. His new company, which was

established in 2010, is also involved in the partnership now.

Upgrading

When asking VN5 how they feel they have benefitted from the partnership with their Danish

partner, they answer:

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“VN5 has learned a lot from our Danish partner. Both the system and the way they work. The

skills.” (Interview with VN5, 201313).

VN5 has learned about new systems and work methods from their Danish partner. This has

likely led to some process upgrading for VN5 as efficiency of their production might have

increased due to better working processes and systems. In addition, VN5 has learned more

about mold making:

“When we opened the IJV a lot of experts came from Denmark to teach us more about making

mold” (Interview with VN5, 2013).

VN5 had already been in the mold making industry for 15 years when they initiated a

partnership with DK5. However, the Danish partner was able to increase VN5’s knowledge on

mold making even further. This is likely to have led to a product upgrading for VN5, as they

could now make more advanced and better quality molds than before. In addition, VN5 has

learned a lot about management and quality control systems. This could also have resulted in

better quality products and products upgrading. VN5 also possess the ISO 9001:2008.

However, VN5 already had the ISO 9001:2003 when they started their cooperation with DK5,

which indicate that it is not a result of the partnership.

Besides from the benefits in technology and skills, VN5 has also benefitted a lot financially:

“Also another benefit we gained was access to many customers – Danish and European

customers. They introduce customers to us” (Interview with VN5, 2013).

VN5 has gained a lot of new customers due to their partnership with DK5. This is very

beneficial for their business as it brings more profit. In addition, the fact that they get access

to foreign customers who demand a high level of quality also demands more from them and

increases their skills. Since the IJV only makes mold and not plastic, VN5 often receives plastic

production projects from the IJV’s customers. In addition, the IJV specializes in small mold

making. The IJV makes 80% of their molding products for LEGO. Therefore, VN5 also receives

the projects if it concerns bigger mold making production. The fact that the IJV produces most

of their products for a famous and recognized company like LEGO is also beneficial for VN5. It

provides them with a good reference for new customers.

13

See appendix 9 for interview

67

VN5 is a total solution company:

“We make everything. Customers just need to provide a sample and we make everything. For

example we make this dog toy – we buy the ball and produce the grip. Then we put it in package,

box it and ship it”(Interview with VN5, 2013).

VN5 has 7 designers who can design molds for new customer products. The fact that VN5 can

provide the total solution gives them a higher profit compared to only producing single parts

for customers. In addition, VN5 is striving to start creating own products in a near future.

They have had an R&D department for 5 years and have years of experience in making mold

and samples. Producing own products could lead to a much higher profit margin.

“As an example: This plastic ball we get 0.3 USD for making and they sell it for a market value of

5 USD. They have a higher risk than us, but we have a small profit”(Interview with VN5, 2013).

VN5 will take higher risks by starting own production, but as long as they still have external

customers as well they will still make basic profits. By advancing to production of own

products VN5 will upgrade functionally which will be a very big step for the company. This

will also lead to a need for marketing skills:

“We cannot do marketing ourselves. All our customers come to us” (Interview with VN5, 2013).

VN5 has no experience in marketing yet which will be a great challenge in their production of

own products. However, regarding international marketing VN5 has got a lot of international

experience by working with DK5 and many international customers. This means that they are

already able to produce the quality level demanded by international customers, but also that

they know what kind of products that enter the markets. The employees of VN5 have also

improved their English skills significantly as all training manuals and software have been in

English during their training sessions with DK5, as well as during communication with them.

VN5 is now close to a major upgrading of their company by designing and marketing own

products. It is difficult to say whether it is due to the partnership with DK5. However, the

cooperation with DK5 has provided a lot more customers and profit to VN5 which gives them

more opportunities to invest in new areas of their company.

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Quantitative Upgrading

VN5 has about 150 employees and the number is increasing annually. In the IJV, there are

about 100 employees. VN5 has just built a new factory with a capacity of 400-500 people

which indicates that they expect to grow even further in the future. The IJV has also just built

a second factory which also indicates that they are growing successfully.

Conclusion on upgrading

VN5 seems to have benefitted in many ways from their 10 yearlong IJV. First of all, they seem

to have experienced product upgrading as they have gained more skills and knowledge about

mold making from their partner. More importantly, they will soon upgrade functionally as

they intend to start own design of products in order to gain higher profits. It is unknown if

this upgrading comes as a result of the partnership. However, VN5 has also gained access to

many new European customers as a result of the partnership, which has ensured them more

growth of their company, and this could have resulted in enough profit to invest in own design.

Internal factors

Learning and knowledge transfer from the IJV

Commitment

With a 10 year long lasting IJV, both companies have showed great commitment. DK5 has

been dependent on VN5 for plastic injection and larger mold making projects, whereas VN5 is

dependent on DK5 for access to customers. Hamel argues that stability and longevity is not

necessarily an appropriate measure of successful IJV’s, as this could indicate a failure to learn

from the other partner and not being able to be independent (Hamel, 1991). In the case of

VN5 it seems that it is not continual learning that withholds them from ending the partnership,

but more the continual access to new customers. In the case of DK5, it seems more likely that

they would have an interest in buying out VN5 from the IJV. However, as DK5 was in financial

trouble resulting in bankruptcy in 2011 they might not have had the capital to do it. DK5

seems to have provided a great deal of partner assistance to VN5. Although their businesses

have been closely related, DK5 does not seem to have feared the competition. In addition,

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there seems to be a great deal of contact between Danish employees and Vietnamese

employees in The IJV:

“They use 2 Danish employees in The IJV as project managers. They help to improve the skills for

Vietnamese employees” (Interview with VN5, 2013).

The fact that DK5 still uses Danish project managers in the IJV after 10 years shows a great

deal of partner assistance and commitment to the IJV. Since VN5 also cooperates closely with

the IJV and their projects, they will also get influenced by the Danish project managers and

they can continually learn.

Control

There is a 50/50% ownership division of the IJV. Some researchers have found that this can

lead to greater knowledge sharing than an unequal division (Lyles and Salk, 2001). In the case

of this IJV it seems as if it has led to a great deal of knowledge acquisition for VN5, but it is

difficult to assess whether it is due to the 50/50 ownership division.

“The Joint venture is run by 2 people. 1 Dane and 1 Vietnamese. The general director is

Vietnamese and the Dane is chairman. The Dane is only in Vietnam few months every year. The

Danish chairman takes care of all customers from EU and the Vietnamese director manages

operations” (Interview with VN5, 2013).

VN5 is not directly involved in the management of the IJV so they do not learn that way.

However, some former designers working in the IJV now work at VN5 so they might transfer

some knowledge. It seems as if DK5 has the greatest degree of bargaining power in this

partnership as VN5 is quite dependent on the access they provide to new customers. On the

other hand, it seems as if VN5 has internalized many of the skills of their Danish partner

which makes them less dependent on them. However, as VN5 is still not conducting their own

marketing activities, they are still quite dependent on their Danish partner.

Trust

There seems to be a great deal of trust between the two partners as the partnership has been

able to exist for 10 years.

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“The Danish and Vietnamese directors are very close friends. The director flies to Denmark 2-3

times a year and even attended the Danish director’s son’s wedding. They also go travelling

together” (Interview with VN5, 2013).

The close friendship between the managers of the two partner companies seems to have a

great influence on the level of trust within the partnership. This high level of trust is likely to

be one of the reasons that this partnership has been able to exist for 10 years and that a lot of

knowledge has been transferred to VN5. DK5 might not be very dependent on their

Vietnamese partner for doing business in Vietnam, but the friendship between the two

managers maintains the partnership. This is in line with Madhok’s research who found that

trust and relationship management was far more important than one partner taking control of

the IJV (Madhok, 1993). This IJV has managed to exist for 10 years with a 50/50 % ownership

division, which could indicate that the high level of trust is one of the main reasons for the

good cooperation.

Conflict

There does not seem to have been a great deal of conflicts between the two partners. When

asking VN5 what difficulties they have faced with the partnership they answer that the

division of profit and how it is spent can be difficult, but that the directors handle it very well.

It seems that the high level of trust also has an influence on the amount of conflicts the

partnership faces. Since the Danish partner DK5 went bankrupt in 2011 it might have

amounted to some conflicts concerning the amount of capital that DK5 would be able to inject

in the IJV in the future, but it does not seem to have led to any dramatic changes in the

partnership.

Absorptive capacity

VN5 seems to have benefitted a great deal from the partnership with DK5, indicating that they

have a high absorptive capacity. VN5 did not have any prior experience with IJV’s before the

IJV. However, the knowledge that they have gained from DK5 concerning mold making skills

has been product related to knowledge they were already specialized in. This could have

increased their absorptive capacity and made the learning process a great deal easier. In

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general, the production of the two partners as well as in the IJV has been very closely related.

This has made the transfer of knowledge and the application of knowledge very accessible.

External factors

Danida and the B2B programme

The partnership between VN5 and DK5 was established in 2003 when Danida was still

running the PSD programme. This means that there were no requirements about introducing

CSR in the IJV as well as other requirements. In addition, there was less monitoring of the

projects and measurement of their effects. This indicates that Danida had less influence on the

upgrading of VN5 compared to the Vietnamese companies in the other cases.

Vietnam

“VN5 received no funding from Danida, but the Vietnamese government gave our IJV tax

exemption for 5 years”(Interview with VN5,2013).

The Vietnamese government helped the partnership between VN5 and DK5 by giving them

tax exemption in their IJV for 5 years. This has been a way for the Vietnamese government to

attract more foreign companies to create IJV’s with Vietnamese companies in the past. This

way the Vietnamese government may have played an important part in making the IJV more

attractive for DK5, which may have increased their long term commitment.

Case conclusion

The upgrading of VN5 seems to have been influenced by the high level of trust between the

two partners. This high level of trust may have led to more knowledge sharing between the

two partners as well as sharing of customers between the IJV and VN5. In addition, the

production at the IJV and the production at VN5 have been closely related to each other as

they both concern mold making. This has made the knowledge sharing very valuable for VN5,

and easier transferrable. It has also made the sharing of customers easier.

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7. Discussion

This chapter will discuss how internal and external factors have influenced the upgrading of

the Vietnamese companies based on the findings from the former analysis. First, it will be

discussed how the 5 companies have upgraded. Secondly, it will be discussed how internal

factors have influenced this upgrading, and thereafter how external factors have influenced it.

7.1 Upgrading

The 5 Vietnamese companies which have been presented in the prior cases seem to have

upgraded in many different ways, and also depending on the industry. In the software

industry, companies have in general not experienced a high degree of upgrading. The

upgrading some of them seem to have experienced is only in products or processes, as

expected. In the case of VN1, they received management training which could have led to

process upgrading. In the case of VN2, some of their key employees learned about new

processes and management from working in the IJV, however they were not able to

implement it in their own company. The software company VN3, which has benefitted the

most of the 3, has learned about and implemented new processes due to the projects they

have cooperated on with their partner. In addition, they have participated in a scrum process

course which has been implemented in the company. This is different from the plastic and

mold making industry where the companies seem to have benefitted from more upgrading

and also experienced functional and sectoral upgrading. In the case of VN4, they experienced

sectoral upgrading by learning the technology of making flagpoles. In addition, they have

implemented CSR in their company and obtained ISO 9001 as a requirement from their

partner. They will also cooperate more on marketing with their Danish partner in the future.

As for VN5, they seem to have experienced product upgrading as they have been trained in

mold making technologies from their partner. In addition, VN5 will soon start own design,

which means that they will upgrade functionally. This could be influenced by the skills of the

designers who have transferred from the IJV to VN5. The next section will discuss why some

of the companies in these 5 cases experienced upgrading while others did not, due to the

influence of internal factors.

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7.2 Internal factors

Commitment

The first internal factor analyzed was commitment. Commitment seems to have been an

important factor in influencing upgrading, but on its own it does not assure upgrading. In the

case of DK2 and VN2, DK2 put a great amount of commitment into the IJV by conducting a lot

of training and introducing different CSR activities, far extending the requirements of Danida.

However, VN2 was one of the companies which did not seem to have upgraded much. On the

other hand, one of the employees in VN2, Mr D, did gain a lot of new skills from helping build

up the IJV, which he would not have gained if DK2 had not been committed to making the IJV

work in the long run. In the case of DK1 and VN1 commitment has also had an influence on

upgrading as DK1 suddenly changed their commitment to the IJV, which ended the

partnership. However, the level of commitment from the Danish partner often seems to

mainly benefit the IJV, and not necessarily the Vietnamese company. This indicates that it has

a great influence on upgrading whether the companies have established IJV’s or not, or

whether some training of the Vietnamese company has taken place before the IJV was created.

It might also affect the level of trust that the partners do not have to bargain over the IJV and

each try to realize their visions. All 5 Danish companies seem to have provided a lot of

training. However, there is a great difference for the outcome of upgrading whether they have

mainly trained within the IJV’s or also directly trained the Vietnamese partner company. Here

is again a difference between the companies which have establishes IJV’s and the companies

which have not. Since all training has taken place at the Vietnamese companies in the cases of

no IJV establishment, they seem to have upgraded more. DK5 and DK2 have both put in 1-2

years of training of employees in their IJV’s, but this has had limited influence on the

upgrading of their Vietnamese partners. Another angle of partner assistance is the degree to

which Danish and Vietnamese employees engage with each other. In all of the cases, Danish

expatriates have been to Vietnam as a requirement from Danida, but some of them have hired

Danish managers for long term and some have hired Vietnamese. DK2 for instance hired a

Danish CEO, and key employees from VN2 also worked in the IJV. In the case of DK4 and DK3,

they have visited and trained the Vietnamese partners in the beginning and now keep in

contact. As for VN3, they have daily contact with their Danish partner through Skype. DK1

sent an expatriate to the IJV for 9 months, which is probably the partnership with the least

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Danish Vietnamese contact. There does not seem to be so much relation between the amount

of contact the Danish and Vietnamese employees have had and the degree to which the

Vietnamese companies have upgraded. It seems more to be of importance what kind of

training or technology they have brought. An exchange of employees between the Vietnamese

company and the IJV might also lead to higher chance of upgrading. In the case of VN2, some

of their key employees learned new skills by working at the IJV. However, the two lines of

business were too incompatible for employees to bring any skills from the IJV to VN2. This

indicates that a similar line of business is also an important factor, which we will return to

later.

Control

This leads to the next factor, control, which also seems to have a great influence on the

outcome of the partnerships. In the two cases where the Danish partner had the majority of

the ownership of the IJV’s, there seemed to very limited benefits for the Vietnamese

companies. Therefore, the Vietnamese companies ended up selling their shares to the Danish

partners. One of the reasons for this could be that the Danish companies have been able to

make the final decisions within in IJV, and have thereby been able to pursue their own visions

for the IJV to their advantage. On the other hand, informants from DK6 and DK714 answer that

they both had 50/50% ownership division as this was required from the embassy at the time.

In the case of DK7 they found it very difficult to make decisions and in the end when the

Vietnamese partner VN7 went bankrupt, the IJV dissolved (Interview with VN7). In the case of

DK6, they also did not find shared management to be a success (Interview with VN6).

However, although a shared ownership division has been a great challenge for the Danish

partners it does not necessarily mean that it is poor for the Vietnamese partners. Although

decision making takes more time with shared management, it might also lead to more

knowledge transfer and learning for the Vietnamese partner, as well as a chance to influence

the direction of the IJV more in their favor. Similar for the two cases where the Vietnamese

companies did not benefit much is that the Vietnamese companies seemed to have a low

bargaining power after the IJV’s had been established.

14

See appendix 12 for interview

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Trust

There are two cases where trust seems to have been an important factor for the longevity of

the partnerships, which might also have influenced upgrading. In the case of VN5 and DK5,

which has been a successful partnership with many benefits for VN5, trust seems to have been

a very important factor. The CEO’s of both companies have become close friends and though

neither of the two partners seems highly dependent on each other, they continue their IJV

together. In fact it seems as if the Vietnamese partner VN5 gains the most from this

partnership as they continually gain contact to new customers through their partner. Trust

also seems to have influenced some of the other partnerships. The first case with VN1, seem to

have dissolved partially due to a lack of trust. VN1 started distrusting their partner after the

financial crisis occurred and the Danish partner changed the vision for the IJV. This lack of

trust might also have grown further due to the uneven ownership division where the VN1 had

limited insight into the management of the IJV. In the case of VN2, which also had uneven

ownership, it seemed to increase trust between the partner that employees from VN2 also

worked in the IJV, and followed daily management.

Conflict

Where there seemed to be a lack of trust there also seemed to be a great deal of conflicts.

There have been conflicts in all the 5 partnerships, but it seems to have been more of a

problem in the 2 partnerships where the Danish partners had majority shares, and the

Vietnamese partners ended up selling their shares in the IJV’s to the Danish partners. This

indicates that there is a link between conflict and control as well as to the longevity of the

partnership. In addition, it seems to be a common source of conflict in some of the

partnerships that the Vietnamese partners find the development of the IJV or business to be

too slow. This might be a cultural difference in the way of building up businesses. However, it

is also likely that the size of the Danish companies have something to do with it. Neither of

them are big companies which can afford to invest endless amount of capital into the

partnership as well as other resources. As VN3 mentions, their Danish partner only have

about 4-5 employees back in Denmark which makes it difficult for them to do any marketing

efforts and develop their business in Vietnam. Another factor which seems to have an

influence on conflict is a division of responsibility. Similar for the two cases involving the

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plastic and mold making industry is that they both have a clear division of responsibility of

activities, and both partnerships seem successful. The reason why a division of responsibility

might lead to a better partnership could be that fewer conflicts will occur as the two partners

work in each of their areas. On the other hand one might argue that a division of responsibility

could lead to less knowledge sharing between the partners as they have less contact with each

other. It seems however as if in these two cases of partnerships the Vietnamese partners have

benefitted from knowledge transfer and have upgraded. In the case of VN4 they will start

cooperating with DK4 in the future concerning marketing in the Australian and American

markets. This can lead to more knowledge transfer to VN4 compared to leaving this

responsibility to DK4, but it might also increase the number of conflicts. A division of

responsibility seems to be good for managing a partnership. However shared responsibilities

might lead to more knowledge transfer.

Absorptive capacity

Another thing which has a great influence on knowledge transfer is absorptive capacity,

especially in the cases of VN3 and VN4. These two companies seem to have benefitted greatly

from the partnerships and they both had a high absorptive capacity in common. In the case of

VN3, the managers had many years of prior experience with working abroad and with the

software industry. In the case of VN4, they have prior experience with technology transfer

from a Japanese partner. However, what also seems very important in this connection is the

product relatedness. In the case of VN2, they were not able to implement any skills and

knowledge acquired in the IJV to VN2, as the activities were not related and the customers

were too different. As for VN5, they had high product relatedness with the IJV and the Danish

partner, which led to great improvements in developing their mold making skills and

improving quality. In addition, they were able to share customers with the IJV. As for VN4, the

flagpole making technology they gained from DK4 has been very different from their primary

business in plastic and mold making. This has provided opportunities for them in a whole new

area of business which could be very valuable in the future. On the other hand it has not

helped them upgrade in their present business of plastic and mold making. Compared to VN5

in the same industry, which has upgraded to full package solution and soon to ODM, VN4 is

still at a stage where they only provide plastic parts which are assembled and packaged other

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places. It could be argued that it might have been more valuable for VN4 to have obtained a

partner which was able to assist them to upgrade in their primary business.

7.3 External factors

Danida

The first external factor analyzed was Danida and the B2B program. Danida’s requirements

concerning CSR seem to have benefitted employees in the IJV’s and some of the Vietnamese

companies. In addition, VN1 benefitted from direct financial support from Danida which they

spent on management training. Also, it is a requirement from Danida to send Danish

expatriates to the IJV’s which made DK1 send one for 9 months. This improves the chances for

knowledge exchange between the partners which leads to an increased chance for upgrading

of the Vietnamese companies. However, Danida in Vietnam also has a requirement of the

partnerships leading to the establishment of IJV’s. When examining the cases, it seems as if the

Vietnamese companies which have not established IJV’s with their partners have benefitted

more than the companies which have. One reason for this could be that the Vietnamese

partners receive more training and knowledge because they become trained to carry out the

activities intended instead of employees in the IJV. In addition, the Vietnamese partner gets

more daily cooperation with the Danish partner which might lead to continual learning. In

addition, there has been a period of time where Danida in Vietnam required the partner to

establish 50/50 % owned IJV’s. This led to many partnership failures due to difficulties with

shared management. However, Danida established this requirement to favor the Vietnamese

companies and their knowledge gain and some researcher have also found that equal equity

share leads to more knowledge sharing. However, since the partnerships ended very fast the

Vietnamese companies probably did not gain much. It does not seem as if Danida is doing

much to ensure the upgrading of the Vietnamese companies. When asking a representative

from the Danida B2B programme in Vietnam how the Vietnamese companies benefit from the

programme, it was answered that they benefit from technology transfers, access to new

markets and financially. In addition, it was answered that they benefit from improved

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management style (Interview with Danish embassy VN, 201315). However, when asking how

they measure if these benefits have taken place the answer is:

“The only thing we measure is growth turnover increase cause there are many different

industries and we are not experts in measuring improvement in these”( Interview with Danish

embassy VN, 2013).

Danida does not directly measure how the Vietnamese companies benefit or distinguish

benefits from industry to industry. This way they gain no new experiences on how to increase

the upgrading of the Vietnamese companies, but only focus on the performance of the IJV’s. It

was one of the visions of the B2B programme that the Vietnamese companies should increase

their competitiveness and receive new technology, but Danida does not seem to do much to

ensure this. Danida’s B2B programme is also being criticized by all the Danish companies for

being too bureaucratical. The Danish and Vietnamese companies have to report various things

in order to ensure that the Danida funding can be justified. However, despite all this reporting

very little is done to ensure that the Vietnamese companies benefit from it. It seems however

as if the employees in the IJV’s benefit a great deal from the CSR as well as from new skills.

Some employees even start their own businesses. In addition, Vietnam benefits from a great

deal of new created employment. However, the focus on the Vietnamese companies seems to

be left out. The B2B program is also being criticized for being too inflexible in terms of what

kind of CSR projects that are carried out. The same CSR projects take place across all

industries although the effect from industry to industry may vary. On the other hand, Danida

seems to be flexible on providing funding for different courses as they provided funding for a

management course for VN1 and for a scrum course for VN3.

Vietnam

Policies and regulations from the Vietnamese government do not seem to have influenced the

upgrading of the Vietnamese companies much. Some of the companies find the Vietnamese

market to be difficult to operate in while others do not. The company which mainly has been

influenced is VN5 because they started their partnership back in 2003 where regulations

were stricter for foreign and private companies. However, the IJV of VN5 and DK5 received

15

See appendix 10 for interview

79

tax exemption for 5 years at that time. This tax exemption has made the IJV more attractive

for DK5 and might have helped provide the IJV with a more long term perspective. In addition,

it made the IJV more profitable at that time. However, there was also a requirement from the

Vietnamese government that foreign companies should enter through IJV’s in most industries,

which means that it was not merely a Danida requirement back then. The way that the

Vietnamese background seems to have influenced the upgrading of the companies the most is

on the absorptive capacity of the companies. As found by Giddens, as the opening up to

foreign investment did not happen until the 90’s, the Vietnamese companies have a short

experience with FDI (Giddens, 2007) and as found by Tsang et al. the Vietnamese companies

might have a lower absorptive capacity due to being part of a former plan economy (Tsang et

al, 2004). The Vietnamese companies in the cases do not seem to be able to absorb much

knowledge themselves from the IJVs. They seem to need more assistance in implementing

skills and processes into their own companies, and this could be the reason why the

partnerships without IJVs lead to most learning and upgrading for the Vietnamese companies.

There is another external factor not taken into consideration from the beginning which has

also influenced the partnerships. The financial crisis has caused many of the B2B partnerships

to dissolve before they led to any upgrading for the Vietnamese partners. This is a factor

which is difficult to take precautions against, but it should be taken into consideration as part

of this study as it might have had more influence on the survival of some of the partnerships

than other factors.

7.4 Chapter conclusion

All in all, commitment is an important factor as it leads to more training and mix of employees

from the two partner companies. However, commitment seems to have a greater impact when

partners do not establish IJVs as training then goes directly into the Vietnamese companies.

Control also seems to influence the upgrading in the sense of the degree to which the

Vietnamese companies take part in the IJVs and are able to steer it towards achieving their

goals. However, as many 50/50 % shared IJVs in the B2B program in Vietnam have failed due

to difficulties in shared management, a 50/50 ownership division does not seem to

80

necessarily lead to upgrading either, although it did for VN5. Perhaps if the partners have

clear shared visions for the IJV and take the time to build up a trust relationship before

creating the IJV, a 50/50 ownership division can be possible and beneficial for both parts.

Trust seems to have been an important factor for the partnership of VN5 and DK5 with the

50/50 owned IJV. In addition, the uneven control in the case of VN1 seems to have had a

negative effect on trust. Mainly as VN1 seemed to lack insight in what took place in the IJV. In

VN2, where the Danish partner also had the majority share, the fact that some employees

from VN2 took part in the daily management of the IJV seemed to improve trust as well as

knowledge transfer. Conflicts seem to be most related to the unevenly controlled IJVs whereas

the other partnerships do not seem to have many conflicts. The conflicts itself do not seem to

be a main influencing factor of why there could be lack of upgrading. Finally, absorptive

capacity seems to have a great influence on the degree of learning and upgrading. Especially,

product relatedness seems to have increased the learning. The Vietnamese companies do not

seem to be able to absorb much knowledge themselves from the IJVs. They seem to need more

assistance in implementing skills and processes into their own companies, and this seems to

be the reason why the partnerships without IJVs lead to most learning and upgrading for the

Vietnamese companies. This is similar with the findings of Tsang et al. who found that in IJV’s

in Vietnam the foreign partner must make a strong commitment and proactively seek ways in

which to transfer crucial knowledge to the local partner (Tsang et al, 2004). This indicates

that many of the Vietnamese companies actually have a low absorptive capacity, which was

also indicated by Tsang et al. which could be related to the history of Vietnam. Related to

absorptive capacity is product relatedness which should make it easier to obtain new

knowledge. Therefore, product relatedness seems of crucial importance when establishing

IJVs in Vietnam as this knowledge will be easier to obtain and apply for the Vietnamese

partner. Whereas, without an IJV establishment, new and less related knowledge can better

get implemented in the Vietnamese companies, as in the case where VN4 learned how to

make flagpoles. In addition, sharing employees between the IJVs and the Vietnamese

companies also seem to increase the chances of learning, but is often not enough to transfer

and implement the learning, as in the case of VN2. Goal congruity also seems important in

order to build up trust and to avoid conflicts. If the two partners share their goals and make

plans to help each other achieve them there might be a higher chance that the partnership will

become beneficial for both parts. For software companies it also seems important to enter a

81

partnership where they will get to cooperate on more sophisticated projects. These can lead

to a higher learning outcome, as in the case of VN3. However, this requires an investment in

English skills of the employees as well as having employees with high enough skills and

experience to take on these projects.

7.4 Discussion in perspective of the philosophies of science

Looking at these findings in the light of critical realism, the indications made are to a large

extent built up on the experiences of different people and the way they have perceived it. This

means that it is not necessarily a picture of the reality. However, as CS also states, reality can

be found in some cases. Therefore it cannot be expected that these case studies have

necessarily revealed the reality. However, they have opened up for some suggestions to what

the reality could look like and how the mechanisms could work for different internal and

external factors in regards to upgrading in IJVs in B2B partnerships in Vietnam. Through more

thorough studies by different researchers in this field it will come closer to an understanding

of what the reality is of these mechanisms. The next and final chapter will round up with a

conclusion of this study.

82

8. Conclusion

This final chapter concludes on this study by answering the research question. In addition, a

small following section will point out some suggestions to Danida’s B2B programme as well as

to the Vietnamese companies based on this study. Afterwards, some limitations to this study

will follow as well as future perspectives, which could be researched by others within this

field.

Looking back at the research question:

“How have different external and internal factors influenced upgrading of Vietnamese

companies in former and established Danida B2B Partnerships?”

The factor which seems to have had most influence on whether the Vietnamese companies

have upgraded or not, is whether the partners have established IJVs. To establish IJVs is a

requirement from Danida’s B2B program created in order to ensure that the Danish partner

cooperates directly with a local company. However, in case VN3 and VN4 where the partners

had not established IJVs the Vietnamese companies seemed to have learned and upgraded

more because all training went directly to their company and not to an IJV. In relation to this,

commitment has also been found to have a great influence as it implies how many resources,

in regards to training and expats, the Danish partner will invest. However, if commitment is

only directed at the IJV it seems to rarely lead to upgrading of the Vietnamese partner. This

could be due to lack of absorptive capacity. The Vietnamese companies in these cases do not

seem to be able to absorb much knowledge themselves from the IJVs. This indicates that they

need more assistance in implementing skills and processes into their own companies and

could indicate a low absorptive capacity. This could be related to the history of Vietnam being

part of a former plan economy. In connection to absorptive capacity, product relatedness was

found to be a very important factor, as this seems to make it easier for the Vietnamese

companies to obtain and apply knowledge. Product relatedness seems most important when

establishing an IJV product as this knowledge will be easier to obtain and apply. Without an

IJV, new and less related knowledge can better get implemented in the Vietnamese companies

as with V4 where they learned to make flagpoles. As for control of the IJV it is difficult to say

how much the uneven ownership divisions have affected the upgrading. There might be a

83

higher chance of knowledge exchange in 50/50 divided IJVs, but many former B2B

partnerships in Vietnam have failed due to difficulties with shared management in those IJVs.

One of the main reasons why the IJV in case 5 seems to have been successful with 50/50

ownership division is the high level of trust, which has turned into close friendship. The

uneven control in the case of VN1 seemed to have had a negative effect on trust. Mainly as

VN1 seemed to lack insight in what took place in the IJV. In VN2, where the Danish partner

also had the majority share, the fact that some employees from VN2 took part in the daily

management of the IJV seemed to improve trust as well as knowledge transfer. A high degree

of conflicts does not seem to have affected upgrading directly, but most conflicts have taken

place in the cases where the Danish partner had the ownership majority.

All in all, these different internal and external factors seems to be entangled and influencing

upgrading in connection with each other. Therefore the upgrading of the Vietnamese

companies is a complex process, and other factors outside the scope of this study are also

likely to have had an influence. As found by CR, social systems are always open and complex.

The same causal powers can produce different outcomes and at the same time, different

causal mechanisms can produce the same result. Therefore it should be noted that although

some findings in this study point towards certain underlying mechanisms, one should be open

to the possibility that the attribution to one mechanism could actually be due to another

(Sayer, 2000). The next section will provide some recommendations for Danida’s B2B

program in Vietnam as well as for the Vietnamese companies, based on the findings from this

study.

8.1 Recommendations

Having found indications that the establishment of IJVs may not be the best way to facilitate

upgrading, Danida should evaluate and consider whether the requirement of establishing IJVs

in their program in Vietnam is the best approach. In some of these cases presented it does not

seem as if the Vietnamese companies have been able to transfer knowledge from the IJV to

their own company, which indicates that more partner assistance is needed. In addition, a

requirement of more product relatedness between the Danish and Vietnamese partner could

also serve the Vietnamese companies in easier knowledge acquisition. A requirement of

higher sharing of employees between the Vietnamese company and the IJV could also lead to

84

more knowledge transfer and eventually upgrading. Lastly, there should be more evaluation

of how the Vietnamese companies benefit besides the measurement of growth. Otherwise

Danida in Vietnam will not gain more experiences in how knowledge and technology is best

transferred to these companies.

As for the Vietnamese companies, it seems that they should take a more active part in learning

when in an IJV partnership. This could for instance be done by letting employees take part in

the IJV for a period of time. As for the Vietnamese companies in the software industry, a

higher focus on obtaining English skills would be suggested. This could be beneficial for

obtaining more sophisticated projects, involving more learning. In addition, better

communication could also lead to more learning as well as to build stronger ties with foreign

partners and customers. As for the Vietnamese companies in the plastic and mold making

industry, it seems that a focus on the primary business instead of expanding into many

different areas provides a higher chance of upgrading products, processes and functionally. In

the case of VN4 they have expanded into 4 different sectors, but do not seem to have reached

a higher level in any of them whereas VN5 has almost reached an upgrading to ODM and OBM.

8.2 Limitations

There are a number of limitations to this study. First of all, the findings of this study cannot be

generalized to all B2B partnerships in Vietnam as it is built on case studies. However, as

argued by Yin, case studies can still be used to show possible cause and effect relationships as

they provide a deeper understanding of the phenomenon being researched (Yin, 2003). These

findings can therefore serve as indications of possible relations of upgrading in B2B

partnerships, which can be examined further in other more large scale studies. In addition,

this study is limited to be a master thesis which both contains a time limit as well as a limit in

pages provided. This means that changes and development over time have been difficult to

research. This study would have become more reliable if it was conducted from the beginning

of the partnerships and data were collected continually over a period of 4-5 years.

85

8.3 Future perspectives

This study has opened up to other perspectives which could be researched in the future. First

of all, as indicated above, this study could be carried out with a broader scope on more B2B

partnerships in Vietnam either as a case studies research or as a survey. This would provide a

clearer picture of how different mechanisms work in upgrading of Vietnamese companies in

Danida B2B partnerships. In addition, it would also be interesting to research if some of these

suggested mechanisms from this study have been similar in the B2B programs in Danida’s

other partner countries, or whether the background of the local country has a great influence

on this. It would also be interesting to research different factors more in detail. For instance

one could investigate whether local companies in Danida’s B2B partnerships in general

upgrade less when creating IJVs. In addition, it would be interesting to investigate product

relatedness and how it affects learning transfer from IJVs to local companies.

Regarding Danida’s B2B program, it would be interesting to carry out an overall evaluation of

the program. Much research and evaluation has been done on the former PSD programme, but

less attention has been paid to whether the B2B program has lived up to its visions and

expectations.

Lastly, more research should in general concern upgrading opportunities from IJV

partnerships. Research on learning in IJVs are rarely focused on how the local companies

benefit from it, but mainly on what is learned within the IJV, or how it affects the performance

and survival of the IJV. More research in this area could be of great benefit to developing

country firms across the world.

86

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Appendix 1: List of respondents and informants

Title Industry Area of specialization

Number Of employees

Area

Respondents: VN1

CEO Software Software outsourcing

200 Hanoi

DK1

CEO Software Add on products for microsoft

10-19 Jutland

VN2 Investor and board member

Software TV commercials and 3D visual effects

30-40 Hanoi

DK2 CEO Software Image processing, videos and websites for real estate agents

50-99 in DK doing sales and Customer service 270 in fully owned subsidiary in VN in production

Hanoi

VN3 President Software IT outsourcing 150 HCMC DK3 CEO Software IT outsourcing

(Dot net and Java)

4-5 In DK About 100 in Ukraine

Jutland

VN4

President and vice president

Plastic and mold making

Plastic, mold making, flagpoles, embroidery.

210 HCMC

VN5 Project manager

Plastic and mold making

Plastic and mold making

150 HCMC

Informants: Embassy Manager Danida B2b

and partnership programme

Hanoi

DK6 CEO Software IT consulting 5-9 Sealand DK7 CEO Software Graphical

production 5-9 in DK 50 in IJV in VN

Sealand

95

Appendix 2.

Interview with VN1.

10th of July - 2013, Hanoi

What is your background?

I was born in 1962

How many years have this company existed?

VN1 was founded in 2000 and a division to this was created in 2005.

What does your company produce?

We have specialized in IT outsourcing from the beginning. In 2008 we started to go back to

the domestic market and enter middle way consulting, SOA (Service oriented architecture),

BPM (Business process management). We have partners in the US – IBM, in Japan, Europe,

Australia etc.

The main fields of activity of the company

- International Programming Services. - To develop Web applications. - System integration, service management system. - Management consulting and information technology systems. - Distribution services have value. - Software Development. - Provide professional IT services.

How many employees do you have? How many did you have 4 years ago?

About 240. Before the joint venture we had about 180. It goes up and down as the company’s

growth goes up and down. Went down with the crisis, went up this year.

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Can you tell a little bit about the joint venture you had/have with the Danish partner?

We had a 35% ownership. We put money into it. I had to register with my own house because

we needed an address in the beginning. I helped to recruit CEO and helped with the entire

recruitment process. I helped with the paperwork, questionnaires, English tests. Basically the

whole process of creating a startup in Vietnam.

Was this your first joint venture?

yes

What did you gain from the joint venture?

We did not gain any new technology. They shared some of the funds from Danida with us.

Danida wanted the JV to be strong so our company also needed to be strong. Therefore they

gave us some of the funding to make it strong too. This way we could send some people in

management training.

Did you start using new technology after the joint venture?

No.

What were your expectations for entering this partnership?

Let me tell you a story. My intention was to build the best company in town with a Microsoft

platform which was not there yet. I wanted to create a high European standard in order to be

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able to serve the European market. I wanted to help Vietnamese people to get high skilled jobs.

We wished to get outsourcing jobs from Danish companies. We get very low rates from the

domestic market and we hoped to get more international projects. The partner said that the

rate of engineers could be 150 USD per hour. In IBM it is only 50 USD per hour. Therefore we

saw it as an excellent chance to enter the Danish market. First year went very well. We got a

few contracts which were 60-70 USD per hour. We got dividend the first year and got back all

the money we had invested in the joint venture – about 35000 USD. Then the Danida fund ran

out – about 5 Mio DKK after just 2 years. The Danish partner had used money to train people –

up to 40 employees. It was difficult for us to keep track of what the money was spent on. In

the end there was only about 1000 USD left. Every year we had a meeting with the Danish

partner. Every second year it was in Vietnam and other second in Denmark. Suddenly the

partner acquired many of our customers and many of our jobs became internal jobs. We could

not make money like that. We wanted to change the situation by outsourcing to Danish

companies. The partner did not want to have very successful company with high revenue.

They kept it at 10% only. This was the wrong model we thought and not what we wanted. We

had many discussions here in Vietnam. It did not meet our expectations. I still insisted to build

the company with a brand name for the market – I was not only interested in the money. I saw

signals of a problem and the intention of the actions. We talked about buying the Danish

partner out. They were very fair. They offered us to buy it for 100.000 USD, but we could not

afford it at the time due to the crisis which had hit our company. So we sold it to the Danish

partner instead and got 35000 USD.

Were these expectations met?

I found the Danida program to be successful in some aspects, but a big failure in the intention.

For us and Vietnam it’s a great chance to get connections to business men in Denmark, to

reach high standards for your product and get an idea about what high standard is. But we

never made it to that part. Danida said our example was still the best one. We kept the JV for 3

years and it was profitable. We also got money from the fund which most local companies do

not. But I find that the program was not as good as intentionally designed.

What difficulties did you meet in connection to this partnership?

It was a problem to share marketing and to get sales and a problem with projects. The

intention from the Danish partner was to invest in low cost markets in order to benefit their

own company. They created a transition of the customers into internal jobs. 150 people

cannot only do internal jobs. They intended to keep the dividend profit very low. We did not

want that. They would take care of all expenses just to make sure that the company stayed

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within a 10% profit. For instance when CEO went on oversea trip to get new customers for

sales it was not included in costs. This was sales marketing costs which should be shared. I

cannot control what sales man goes to sell to who. So we could not agree to that partnership

anymore. We completed it in a good way and we still respect each other.

How many jobs did this joint venture create?

Around 50 employees.

Do you think this joint venture has a positive effect on the local society?

It had a very positive effect I would say. Due to individual career development. Many of the

employees got Microsoft certificated which I am very proud of. They still work in that

company today.

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Appendix 3

Interview with DK1

28th of May, 2013, Copenhagen

Could you start off by telling a bit about your IJV in Vietnam?

It began in 2008. We went on a couple of travels and met with 2 potential partners. 1 in Hanoi

and one in Saigon. Spent 2 trips before we decided on VN1 in Hanoi. The IJV went really well

for a long time and then the prospect changed. Now it is 100% owned by us. It was thought of

as an outsourcing development center. The local partner has been in the market since 2000

and they seemed to have enough resources in order to get projects. In 2008 the crisis

happened and our plan was no longer possible. The Vietnamese partner was no longer able to

provide capital and now we just use it as our own.

In the beginning we had about 40 employees. Today around 25 to 27.

Why did you choose Vietnam?

We have been outsourcing in Estonia before and in Pakistan and India so the timing from

Danida was perfect. They sent us advertisement with opportunities in Vietnam. It was too

difficult in India as it is too popular these days for software outsourcing. We would have been

number 5000 in India so it would not have been possible to get skilled people.

Did you send Danish expatriates to the IJV?

We did not wish to send Danish people there as we have specialized in outsourcing for many

years. However, it was a requirement from Danida so we sent one for about 9 months.

What was the ownership division in your IJV?

65/35 with 65 to us. This worked really well. We covered most expenses. When we involved

the Vietnamese partner it started to become a problem due to the changes in the strategy. The

Vietnamese partner was insecure after the crisis.

Did you transfer technology to your Vietnamese partner?

Yes, a lot. The projects we had in foreign markets required special technology. We got the

Microsoft gold membership certificate and all employees were certified and have been to

Microsoft courses.

Have you trained your Vietnamese partner?

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We had courses in cultural differences and English courses as well as a lot of social courses

concerning health and so forth. We followed all requirements from Danida.

How did the partner selection process take place? Why did you choose this partner?

Basically it was all about chemistry and how we matched each other. We believed we could

trust them. We saw them as collegues and not competitors.

What difficulties have you faced with this partnership?

It has been really good. We only had 1 difficulty. The understanding of our new strategy has

been very difficult. It led to a basic disagreement between us and the Vietnamese partner after

the crisis.

Have you benefitted from your activities in Vietnam?

We have received about 25 mio DKK in profit – which we also invested in it. It is still difficult

to assess whether it has been good business or not, but we value that continually. All our

development is done in house which gives us an advantage compared to other Danish

companies outsourcing as we have more control over it.

Are your activties in Vietnam different from your activties in Denmark?

The projects in Vietnam are on the same level as what we do in Denmark. However, its

different projects as we do not have these competences in our Danish office.

Do you believe that your IJV has had a positive influence on the local society?

Yes I surely believe that. We were told that we should expect many people to resign every

year around February, but we have had incredible loyal employees – which much indicate that

we do a good job. We have hired a Vietnamese CEO – He has both worked in Austria and

America. We have encouraged him to make the company more social and involve the families

of the employees and so forth.

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How do you think you have influenced your local partner?

I think they have gained a lot financially. They have received a lot of direct support from

Danida for education as well as travel to Denmark in order to gain greater understanding of

cultural differences. I do not know if they are doing better today.

In which ways has policies and regulations from the Vietnamese government

influenced your activities in Vietnam?

I can tell you one thing. Now companies can no longer stay in residential appartments. That

has had quite an influence. Other than that we have not really had many challenges in that

area. We have hired an experienced CEO who takes care of these kind of things. The internet

in Vietnam is slow which I guess is also due to Vietnamese policy in some way.

In which ways has Danida’s policies and regulations influenced your activities in

Vietnam?

It has been VERY bureaucratical. I am sure that if I should do this over again I would do it

without the support from Danida.

Is this your first international joint venture?

No

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Appendix 4

Interview with VN2

August 30th, 2013 Hanoi

What is your background?

Engineer, but I never worked as an engineer. I have been in the Software industry since 1999

and only in this industry.

How many years have this company existed?

About 20 years. It has changed name many times depending on who we have been working

with. It is very different from Denmark. When we tried to register as graphics company years

ago they did not know what it was yet and refused it.. That’s why we needed a different name.

What does your company produce?

Graphics production. Creative production.. TV commercials, web and so forth..

How many employees do you have? How many did you have 4 years ago?

It varies. In peak time between 30-40 employees. Less employees after the partnership.. Many

of our most skilled employees moved to the IJV to support it. I also worked in the IJV. Now I

work on a different independent project. I am still involved in VN2, but only through weekly

meetings.

Was this your first joint venture?

Yes, but we have another partnership with an American partner – BCC Business contractor

What did you gain from the joint venture?

I think many different aspects. First of all the new staff got jobs. We could export to new

market. More jobs to Vietnamese. About 10 staff in the beginning. Today about 300.

I think for VN2 it is more about the personal skills that our key employees have gained. It is

about experience. There has also been a lot of training within the IJV. Staff was sent to

Denmark for 1-2 weeks for training. I myself have actually never been to Denmark. I let the

employees go who have never been abroad before. It was different kinds of training Both soft

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skills and technical training, human resource training etc.. That is good for the employees.

Did you exchange employees with the IJV?

We exchanged few employees. However, customers are very different between the two

companies so it is difficult to apply the skills and knowledge. You cannot just copy the

business model or use skills learned in the IJV. Customers need different things. Oversea

customers, such as the ones the IJV serves, request something flexible and high quality at low

price. If you work with Vietnamese government they just spend money. They don’t care how

much it costs. It is mainly like that in Vietnam. We also have some international customers in

VN2, but it’s a tough competition.

Why did you decide to end the partnership and leave the IJV?

We think we could do a professional job, but we do not have those kind of clients in Vietnam.

We believe we can offer that service to more clients. Therefore we look for a partner who

knows more about foreign clients and how to serve them. Many IJVs fail because the Danish

partner cannot serve the market outside of Vietnam. We already know how to serve the

Vietnamese market so then only the Danish partner benefit. We need a partner who knows

more than us. Our partner did not have the skills to find new customers.

Did you benefit financially from the IJV?

To build a strong good IJV costs a lot of money. In the beginning we spent a lot of money. That

is okay for the Danish partner. They are used to doing things that way step by step. In Vietnam

people are still hungering for success and are not patient enough to wait for the investment to

flourish. 6-10 years ago you could make easy money in Vietnam. It was difficult for us to

accept that it was going so slow. So I would say that it was not so interesting financially

compared to how fast money was made in other Vietnamese companies at that time. We did

not lose money on it, but if the IJV had not had the Danida support we would have.

And did your revenue increase over the years?

For many years we prepared to look for the partnership. That was our main idea for

improving our business. We do not believe we can grow in the Vietnamese market. I am

applying skills from the IJV to my new project. In that way you can say that the learning

experience has been good. You learn skills and gain experience which you need to think about

how you can apply.

Is your project a new company or is it part of VN2?

It is a new company that I am starting. I am looking for new foreign partners. I will have to

face cultural differences again.

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What kind of skills and knowledge did you yourself gain from the IJV?

Many things. It takes a lot of time to discuss and reach a consensus. In Vietnam we do not do

that we just act. So I learned about that. We also have to care more about the humans – CSR.

You need to invest a lot in training and development. I also learned that you should keep focus

on the core business. You get many opportunities, but should learn to keep focus. I am

applying these things to my new business.

What were your expectations for entering this partnership?

The goal was to create good jobs for our people. My job is to find a way how this can work and

make money at the same time. I want to try to convince people that there are many way you

can make money. You don’t have to do some illegal job. Just have a decent job and live a

simple life. That is good. I saw a lot of potential in our staff, but they did not believe in

themselves. In the beginning they could make 1.5 floorplans per hour. In Denmark they could

make 4.. I told them no problem, we will be able to do that too. I saw how they made in work

in the Danish company and now they do it 6 times better than before. First the employees

were taught how to make floorplans and thereafter image processing. We do not make these

kind of activities in VN2.

What difficulties did you meet in connection to this partnership?

Many! The most difficult was using the same methods. We have different ways of thinking

about problems. We had to find common ground on a lot of issues. We needed good

equipment to compete. The Danish partner said we will buy apple cause the quality is good,

but on the cost side that is very expensive. We bought apple too 30 years ago, but we were not

able to make money on it. If you lose a couple of hours in a Danish company it’s a lot of money

lost. In a Vietnamese company it does not matter as much.. In Vietnam the money matter more

than the time. There were always a lot of discussions on financial issues. That is why many

IJV’s fail. The partners are not patient enough to discuss and reach consensus.

Did it make a difference that the CEO of the IJV had lived and worker in Vietnam for

many years before?

It is a big advantage, but it is not the real key. He is still a foreigner. You need to make

combinations with people who are good at different things. There are still big differences in

culture. Even though I have been to Europe many times I still do not understand the mentality.

What is their motivation?

Do you think this joint venture has a positive effect on the local society?

Yes. It has brought new things and that is always good. Employees get to see a different way of

working.

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Have any of the employees started own companies?

Very few have. It is difficult to apply the skills to a new company. Its like traffic in Vietnam.

You want to follow the rules when you drive, but then you would get nowhere! The IJV is like

an island (an oasis) in Vietnam. Not many things are related to the Vietnamese reality of doing

business. That’s why they are not prepared to start their own companies.

Did you obtain quality assurance certificates – such as ??

No Microsoft qualifications.. No iso in our business. We have our own quality assurance

control system – workflow. There are many levels of quality checking. This is also different

from Vietnamese companies.

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Appendix 5

Interview with DK2

8th of July, 2013 Hanoi

Could you start off by telling a bit about your IJV in Vietnam?

I was already in Vietnam when it started. In 2006 the manager in Denmark saw a competitive

advantage by moving part of production to Vietnam. This way they could take advantage of

the time difference and they could work in Asia while Denmark was sleeping. This was the

basic idea. In addition this would mean that they could deliver the product faster to the clients.

The first idea was going to Thailand as this is the country in Asia most Danes are familiar with.

They contacted DI and they recommended Vietnam. The company went there and visited 10

companies. 1 stood out which was VN2. It was more the chemistry between them than it was

technical competences. Later they went back and spent a couple of weeks with VN2. They

made an application for a pilot project – this was where I came in in Sep 2006. The pilot

project ran from the beginning of November 2006 to July 2007 where we established the IJV

with a 75/25 ownership division. The local partner was asked to invest 300.000 USD in the JV

in order to show that they were serious. We started out with real-estate drawings and small

files. It was easy to teach them and in 6-7 months we were convinced that it could be a success.

Hereafter we started looking into image processing and we gradually moved this task from

Denmark to Vietnam. It took about a year as many people had to be educated in this. We had

to make sure that the quality remained at the same level. In the end of 2009 all production

had been moved from Denmark and Sweden to Vietnam. In January 2010 the JV changed from

cost center to profit center. The Vietnam office now had to find clients as well. This has been

the strategy ever since to ensure extern clients. We have about 270 employees both fulltime

and part time and trainees. They work in 3 day shifts in order to exploit the equipment as

much as possible. Scaling is very important to us as well as quality and service. We try to

attract customers who have volume – not just single photographers. One of our greatest

customers is Danbolig.

Did you send Danish expatriates to the IJV?

There are only 2 foreigners and 2 Danish trainees besides me (CEO). The trainees travel

between Denmark and Vietnam. Our manager of quality is Swedish. We have had about 3

different ones. They usually stay 1-2 years. We have had 1 Danish developer who have helped

implementing the systems. This has been the only real expat. It is easier to recruit people who

are already abroad.

What is the ownership division in your IJV?

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75/25 in the beginning and now 100% Danish owned by DK2 due to a request by our

Vietnamese partner. They were 3 investors from the other company. They wanted money out

of the company for investment. When one of them sold their stakes the others followed. They

got a decent price for it and I would say they made a good deal the 4 years they were involved

in this. We had good relations to our partner. One of our investors have stayed in contact with

us as a CSR project manager.

Did you transfer technology to your Vietnamese partner?

Yes! Everything we do from 3D to image processing and slide show and so forth has been

transferred from DK2. We have provided all information on how to use it. In Vietnam, our IJV

is the leader in our field. The leading image processing platform. Our goal is to be the world

leader in this field. We work in the niche of real-estate industry where we are within the top

10 in the world. We have trained 400-500 employees over the years due to turnaround of staff.

They are very skilled. The Vietnamese are very technically skilled. We have built up the whole

work flow and systems for customers. It is mainly in the production where we have

transferred technologies as well as solutions to develop new products.

Did you train your Vietnamese partner?

We have used 3-4 methods since the beginning. In the beginning Danish people trained the

local staff and later the locals could take over the training of new employees. We have created

a bonus education program. If employees have a high performance rate we will provide them

with a 60USD education bonus which they can use on education. We send some of them to

Denmark and they can also train themselves via guidelines that we have developed. Most of

the employees make the bonus – it can also be used on English education and so forth. Half of

the money has to be spent on education relevant for their job at the IJV, but the other half can

be spent on something else. Sometimes we also sponsor a course. The work language at the

IJV is English, but its difficult since the level is not very high. We have just hired an English

teacher. We will give it 1 year to see if it pays off or not. When we are really busy the

employees will not have time to show up but we will try it. We are not working in the

Vietnamese market but only for foreign customers. They need to understand instruction in

English.

In what other ways did you support your Vietnamese partner?

We have had a CSR focus from day one. We wanted to go even further than the requirements

from Danida. Courses in HIV, agronomics and so forth. But we have also hired handicapped

people which has been a success. We have set guidelines that 12% should be handicapped,

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40% women. Most of our employees also come from outside Hanoi from rural provinces. They

did not have much education. We train them. We also have the CSR program which Mr. D has

been in charge of. We also have a center for drug addicts and prostitutes who are sent to a

sort of jail, but also an educational institution. Since 2 years ago we have had people out there

to educate them and then we hire some of them afterwards. There have been lot of challenges

and concerns regarding this from our employees and from their parents. The drug addicts and

prostitutes have been used to living free lives and have probably also been used to earning

more money. It has been a success with some of them but with others we had to accept that

they slowly returned to their old lives and habits. However it has been an interesting project

and a great success. Our employees also arrange own charity events where they collect

clothes and money for rural areas. We also do a great deal to save electricity and so forth.

How did the partner selection process take place? Why did you choose this partner?

It was a graphic agency but they did various things. They made some 3D as well as

development for the game industry. However, it was not bigger than 15-20 people. We only

make a little bit of 3D visualization so our areas are quite different from each other. They do

not do any image processing. They were 3 investors. One of them worked in the JV full time

(Mr. D). All the way to December 2011. In the beginning he was the manager. When we made

the company I became CEO and he became full time employee. He was an important part in

shaping the culture in the company so it neither became too Danish not too Vietnamese. He

was especially an important person towards our young employees. He created a corporate

culture. He was the only investor who worked in the JV.

What difficulties have you faced with this partnership?

They have a different way than we do. In the Danish way we look at what value we can bring

to the company and the Vietnamese more look at partnerships as a 50/50 deal. However,

since we brought much more to the partnership that would not have made sense. The Danish

business culture is also faster. The Vietnamese want to talk things more through. Once the

company started to make money the Vietnamese saw it as a profit to be spent right away. In

Denmark we see it more long term. The money has to be re-invested in the company. There

were different opinions on this matter but in the end they understood our point of view. We

have had a very good cooperation with our partner. DK2 brought in customers and technology

so they have kind of had a free ride. They have not have been able to have a lot of influence

with their 35% share, but they have made money from day 1. The real-estate market had

dropped quite a lot when the Vietnamese partner decided to leave and DK2 was hit hard by

that crisis, however now 2 years later we are even stronger than before the crisis. It was again

a bit short time thinking of the Vietnamese partner to leave at that time.

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We also have an office in Spain – a production platform. When something needs Danish/

Swedish speak or text we can find employees there which we cannot find in Vietnam. Our

customers need fast service and high quality and the Danish market is too expensive for that.

However, this way we create more high value jobs in Denmark.

Did you benefit from your activities in Vietnam?

It has provided DK2 with a competitive advantage. DK2 now owns the platform which means

that we can test the products and so forth. This gives us an advantage over companies which

outsource. It also gives us the opportunity to look into other markets.

Are your activities in Vietnam different from your activities in Denmark?

Yes. We have moved all production to Vietnam. In Denmark we only have customer service,

sales and no production at all.

Do you believe that your IJV has a positive influence on the local society?

Yes. Due to the many jobs we have created as well as our CSR activities. We have got a lot of

attention domestically and internationally for the things we do. Outsourcing has a bad

reputation and we have raised the bar for what can be done with the high level of technology

we have brought in. We have some of the most skilled employees and the people who leave us

are usually the less skilled. We have many employees from since the beginning 7 years ago.

How do you think you have influenced your local partner?

Mr. D (one of the investors) has learned a great deal about how to build up a business and

about how to work with international partners. As a company it is limited how much they got

out of it. From the beginning it was meant to be completely separate from the local company

and they have not shared employees with each other. It was a bit difficult as they mainly

worked in the domestic market which was not ready for our products yet.

In which ways have policies and regulations from the Vietnamese government

influenced your activities in Vietnam?

It is quite favorable for foreign companies here. It is easy to establish yourself and the rules

are clear and easy. We have not met much trouble. However, our company does not have any

real production as it is digital which also makes a great difference. There is quite a lot of

bureaucracy but if you follow it there are no problems. We have a full time employee to take

care of this.

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In which ways have policies and regulations from Danida influenced your activities in

Vietnam?

It has been good. We have been lucky to get the 75/25. After we got this it was made into

50/50. We did not have that problem. It has worked out great and we have followed all the

rules.

Was this your first IJV?

Yes and only one. We own 100% in Sweden and Spain.

Have some of your employees become entrepreneurs afterwards?

Some have become independent. However, many of them have afterwards asked if they could

return to the company, but we have a policy about not taking them back once they decide to

leave us.

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Appendix 6

Interview with VN3

2nd of August, 2013 HCMC

What is your background?

Technical background. I have an MBA degree and I used to work overseas in America and

Canada. I have been in this industry for 17 years. I used to run another company, but 5 years

ago I started this company with some friends. Each of our executive members has 15+ years of

experience in managing large offshore team for MNCs.

How many years have this company existed?

5 years. We just had 5 years anniversary in April this year. We had the cooperation with the

Danish company since 2010. It is not yet a joint venture, but it will be. Danida’s B2B

programme helped to find Danish partner and we provide service for the Danish market such

as BPO, projects, data entry , graphics, data validation etc. Data validation means to validate

information from a website. For instance a second hand car web page. Our Danish partner

also have a company in Ukraine. This means that they can exploit all 24 hours of the day due

to different time zones. They also produce in Denmark.

How many employees do you have? How many did you have 4 years ago?

At peak time around 15-20. At the moment 12 people working on the Danish projects. In VN3

we have 150 employees in total. When we started 5 years ago we were only 8 people.

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Can you tell a little bit about the joint venture you had/have with the Danish partner?

On day to day basis we email and skype together with our Danish partner and make video

conference calls. We mainly use skype. We agree on a workplan each day. We have a project

coordinator who cooperated with the Danish partner. For specific software development

projects 1 person will set it up and monitor it. The Danish partner is mainly responsible of

customer relationship management. They manage marketing and sales and create a cultural

bridge between our company and the European market.

We mainly work for media agencies and IT service companies. This way we can get many

projects after each other instead of just one. We strive to work with medium sized companies

who match our capacity. It is no use to work with a too small company or too big. Our focus is

on clients who develop software (ISV) Independent software vendor.

Was this your first joint venture?

No, but first one in Europe. We also have a cooperation with an American company. We also

strive to create a Joint venture with them in the future. For Joint ventures I find that both sides

have to bring value. However, one should also consider cultural differences. If the gap is too

big it will not work. In addition, the volume of business should be big enough.

What did you gain from the joint venture?

Financial help due to more customers

Access to more customers

Knowledge about process systems

Training of employees

We have gained knowledge about Scrum. The Danish partner shared their knowledge

on this and Danida funded high value courses in Scrum for our company.

We also learned about the way to work with clients from our Danish partner – how

they think.

Learn more about culture – both a different kind of working culture, but also how to

manage foreign clients.

We also learned about CSR. First when we heard about this we did not care much for it. We

thought it was only something for Multinational corporations and governments. However, we

received funding for it and discussed CSR with managers from all around the world at an

event at an event at the Danish embassy, and we learned that it involves more than we

thought and also involves our company.

In addition, we learned more about reviewing processes, ensuring respect for employees,

respect between genders and hiring more females in the company. We also do charity work in

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VN3 now. We contribute with funds to a school of disabled children. We also provide English

traning, then we had the HIV programme. That was one part of the programme I did not find

very useful and I also told that to the embassy. I think the programme should be more flexible

in this. I think the HIV programme is good for workers in factories who never finished college,

but for white collar workers like in our business they already know these things. It was fun,

but not so helpful. Maybe training on how to sit when working with IT would have been better.

We also gained improved customer relationship management with more media agencies. We

had a project in Denmark in the health care sector for data entry. When we kicked off the

project our client came over and sometimes we sent an engineer for training in Denmark. We

also gained knowledge about the systems and processes. We also use these process systems in

our own company. However, it varies from client to client depending on their wishes. We

mainly have clients who work in software development (IOS development software) We help

them develop and reduce costs to market. Those companies have recurrent work so we focus

on making them long term clients. If we have fortune 500 company clients then they sub

contract, but we focus on medium sized clients (app 100 employees companies) . If the client

company is too big the we cannot manage it.

What kind of software do you develop?

Software for phone and web. For instance commercial or small phone games to promote a

brand. We are currently making this cangaroo game called “Jumpy” to promote a client where

the company is called Jumpy.

Did you start using new technology after the joint venture?

In my view there is not much technology to be gained in IT as it is all available through the

internet. We did however learn a lot from working on different projects. For instance the

health care project. Now we know more about the health care sector for another time. We also

gained a lot of business knowledge.

How about Microsoft certifications?

We already had the Microsoft certifications. It is not very expensive. It cost about 100-200

USD for the exam. However, The B2B programme gave funding for a scrum course. The scrum

process is about applying lean to IT. Like agile? It is a branch of agile. We use scrum on our

projects now. This for instance means that clients do not have to wait until end of projects to

see results as we give them constant updates and show them the development. This means

that they can sooner give feed-back.

What were your expectations for entering this partnership?

We were looking for business opportunities to gain our business but then also wanted to learn

more and become more mature as a company. We wanted to make the company more

professional.

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Were these expectations met?

The problem with our current partner is that it is medium-sized company (In Denmark 4-5

people) they are too busy with day to day work and do not have enough time for marketing

efforts and developing the business. It takes too long time to acquire new clients and we are

not quite satisfied with this yet. Our American partner is better at getting new clients. I think

it is due to a lot shorter decision making time in American businesses. They have about 100

employees in Ukraine who work on the same kinds of projects. The advantage is lower cost

and also advantage of the time zones.

Do you think this joint venture has a positive effect on the local society?

Yes. It creates more jobs. Also, we learn good things to apply to our company.

What do you find to be the explanation that you have increased your performance / or

not increased? (economy, reforms, partnership…)

That is a difficult question. I still think we need to find out where our niche market is – we

focus on several areas – it is hard to say no and yes. However, we have at least narrowed it

down to ISV and software development.

In which ways do you feel that cultural differences have influenced the partnership?

There are some differences in culture, but as long as you bear it in mind it is not a great

challenge. One example is that Vietnamese people feel guilty easily so they say yes every time.

You have to read what kind of yes it is. Loud yes! Or lower Yes.. Also, The Danes are so direct,

even more than the Americans.

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Appendix 7

Interview with DK3

22nd of August, 2013 - via skype

Could you start by telling a bit about your IJV in Vietnam ?

DK3 has been a Danish outsourcing company since 2007 where we found people in Ukraine. It

started as a spin-off for another company and then became a separate company. We have a

focus on finding people educated in Dot net and Java. In addition, we have a focus on different

industries such as energy, finance, health care etc. We have developed ourselves in LLF since

we made the contract with VN3 concerning resources in Vietnam. We also started in Kiev here

in 2013. We headhunt people in Vietnam and establish contact to customers. It is actually like

a full time job. We have a great focus on culture and that employees can cooperate together.

We use the scrum model. That means daily conversations via skype. Part of the developers are

in DK and part of them are in Vietnam so they have to communicate daily. The customers need

to have a team that they are familiar with so they can get more and more out of the projects.

Spar Nord was our first customer in 2007 and still is.

Why did you choose Vietnam?

I am of the opinion that you should never get funding for something you would not have done

anyway, but I was not part of the company when the decision was made. The mother company

already had activities in Vietnam which made it an obvious choice. We wanted to try an

offshore operation instead of a nearshore as this would provide increased possibilities. In

Vietnam you often meet focus on price and competences in our business. The daily wage is

considerately lower in Vietnam. We also knew others who had good experiences with

Vietnam.

Did you send Danish expatriates to the IJV?

I have been there several times and our vice president she has the daily contact with the

operation. She has also been part of setting up the whole thing in Ukraine. We mainly do

business processing operations (BPO) .

Did you transfer technology to your Vietnamese partner?

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Yes. We have spent a lot of energy on transferring knowledge concerning our deliverance

model. In cooperation with VN3 we have made it fit to a Vietnamese reality. We have also

spent a lot of energy on cultural understanding.

Did you train your Vietnamese partner?

We have trained VN3 in how to manage customer projects and how to recruit people and train

them. There has been a lot of knowledge transfer in that connection regarding BPO projects

and regarding new technology. It has been very wide. Also a lot of knowledge regarding more

soft areas such as different processes more hardcore knowledge about technology. Regarding

projects it has been focused a lot on what kind of tools to use. There has also been a lot of

training in new terminologies and use of language. You think that BPO projects are so simple

but it contains a lot more cultural things than you would expect. Take for instance a plan over

a house. A house in Hanoi is small in omfang but quite high. A Danish house on the other hand

is quite low but the floor plan is very large. There is a lot you need to learn. We also want

designations on Danish house plans that they also need to learn. It looks easy, but there is a lot

to it.

Do you think your Vietnamese partner company is doing better today?

I think their management would have done just as well either way. “J” has been to Canada and

has cooperated with western partners for many years. Other areas in the organization we

have influenced a lot more. For instance the Danish informality.. When I go to the organization

in Vietnam I just go talk to the people I need to talk to.

What difficulties did you face with the partnership?

Communication, communication communication! But that is the only thing. It has not been

possible for us to make our normal model for outsourcing work. It is not VN3s fault. In

Denmark we have this perception that if a person is not good at expressing themselves then

they are not intelligent. The Danish clients have found the English level of the Vietnamese

employees to be too bad. This means that we have not been able to use the same model as we

do in Ukraine. Now we only make BPO tasks instead without the daily communication. It is the

old fashion sourcing model. Internally in VN3 they use the agile model, but are not connected

directly to the client in Denmark.

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But does that not make the scrum process difficult?

When applying scrum you make a lot of requirements for your product and test it continually.

You can make an incredible solution, but just to the wrong problem. Therefore with scrum

you take it little by little and communicate with the customer. You develop the system little by

little. You also work in a sprint meaning that you look at the process in retrospective. What

went well and what did not. This way you can constantly improve your working process.

Scrum comes from a word in rugby which means the cluster of people. VN3 cannot be part of

our cluster, but they use scrum independently. This means that we have to manage the whole

process with the client. That means that the projects we can outsource to Vietnam are small

ones due to the communication difficulties.

In which ways do you feel that cultural differences have influenced the partnership?

There is more a ”go do” spirit in Vietnam than in Denmark. You need to be aware of these

differences as a Danish company beforehand. It is mainly Danish employees who have

prejudices about working with Vietnamese people. The Vietnamese people can maybe be a bit

more impatient in some ways due to this go do attitude, but it also brings something new and

positive with it. We are more lazy in Denmark. We have forgotten about this kind of attitude.

Do you think that your IJV has had a positive influence on the local society?

Yes I certainly believe so. All the projects we can provide creates more jobs locally. In addition,

the CSR courses make a difference. It is also positive for Denmark cause without the

outsourcing these companies would not be able to compete.

In which ways have policies and regulations from the Vietnamese government

influenced your activities in Vietnam?

We have a 100% non-tolerance policy against corruption. I think they do everything here in a

more firm way. You need to know someone here who can help you manage the political

landscape.

In which ways have policies and regulations from Danida influenced your activities in

Vietnam?

It has not affected us negatively in any way. The only problem has been the Danish visa rules.

It has been a problem getting visa for people from VN3 when visiting Denmark. Otherwise

Danida has been good. However, their report system is rigid. Some of their rules are a bit

strange, but we have had good communication with them all the way.

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Appendix 8

Interview VN4

29th of August, 2013 HCMC

What is your background?

VN4 was founded in 1998. It specializes in mold design and mold making and plastic injection.

2 years ago we received a request from the Danish embassy about the fiberglass flagpole. We

have good relation with the Danish embassy and when they showed us the project we felt that

we had the competence to carry it out. We flew to Denmark in 2011 and had contact with DK4.

Now we produce the fiber glass flagpole and export 1 container every month - except during

winter where no Danish people want to buy a flagpole. There is not a big domestic market. In

Vietnam only companies have flagpoles, not houses. DK4 mainly sells to Northern Europe.

Later we hope to expand the market further. We received technology for the flagpole from

Denmark. Only VN4 can produce fiber glass in Vietnam. We hope to develop a light pole

which will be good for sea shore as the fiber glass pole will not get rusty. In Vietnam many

flagpoles are made by steel which is dangerous. Last year 2 boys died in HCMC because they

got electric shock from a flag pole. VN4 is a private company with 7 shareholders. I am one of

them.

How many years have this company existed?

25 years. At our first workshop we only had one machine. We had to make most by hand.

Since then we have expanded more and more and grown into a million size company. We

export 60% and sell 40% locally. We supply Japanese companies such as Sanyo with material

for electrical appliances.

VN4 is divided into 4 areas:

Trading, Mold and Plastic, Flagpoles and Embroidery.

How many employees do you have? How many did you have 4 years ago?

250. It has increased every year.

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Can you tell a little bit about the joint venture you had/have with the Danish partner?

It is a cooperation not a Joint venture. We are two separate companies. The target from our

side is new technology and access to new markets and administration. From the Danish side

they get high quality fiber glass at cheap price. We had to modify our company in order to

meet the Danish regulations and the requirements to get ISO 9001 in order to produce the

flagpole. This meant increased control of quality. In addition we had to introduce CSR. Our

employees have studied English, learned about health care and about protecting the

environment as well as safety of workers.

What did you gain from the joint venture?

Many things. We learned about new technology. We did not know how to make fiber glass

before. We met at the embassy in July 2011. We signed a contract and divided the

responsibility between us. We are in charge of production and the Danish partner is in charge

of sales and marketing. In the beginning very few flagpoles were good. Many defect products.

But then workers increased their skills. Every day we want to increase our skill of workers to

make higher quality and cheaper products. Next year we hope to increase the capacity and to

open new markets so we will not have to stop production during winter time. E.g. America

and Australia where they also use flagpoles a lot. There are only about 5 flagpole producers in

the world. The biggest one is in Poland, then there is one in Spain, Portugal and Bosnia. Also

one in Thailand owned by Chinese, but the quality is not high. In Denmark there is no longer

any production, only trading. It is difficult to produce there cause everything is expensive.

DK4 has made good profit on moving their production here. The technology for the flagpole

has almost not changed since it was invented in 1938 in South Africa by some Europeans. We

have very long mold to make the round of the pole. I saw in history that the technology did not

change. In Europe they do not want to make it as it has to be made by hand and costs too

much labour. We want to change the way of making it and use machine, but it does not work –

it does not meet quality.

Have you introduced new activities in your business such as marketing or design

which you did not have before the partnership?

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Yes. We improved management and administration and reporting because we had to report to

Danida. Every segment had to be audited by a 3rd company. As for marketing, we have learned

more about doing business and marketing in Europe. Before this we had mainly done

business with Japan which is very different so we improved our knowledge on this. The Danes

often come here to check quality. There is a Danish guy living here in HCMC who comes by to

check quality every time we export a new container to Denmark. We also cooperate in

marketing in order to export to Australia and the US. We have to recruit more staff with good

English skills. We also learn how to sell the product in Europe. When we visit Denmark we see

how they introduce products into the market. We have for instance seen how they deliver the

service of raising the flagpole in the garden of people’s homes.

Have you recently moved into into new sectors or markets? (Including international

markets)

We are trying to enter the market for streetlight poles as this is the same technology as flag

pole. We are now collecting the document required to be approved to make street light poles.

We hope to get it by the end of this year and start production next year. In the future we also

plan to start producing wind mills as it is also the same technology.

When did you start cooperating with Japan?

We started cooperation in 2004. The preparation phase took 3 years. We made the first visit

in 2001. It is very stable to work with the Japanese. We gained the technology from Japan to

produce clothes. Every month we export 20 million spoles of syntex. We want to increase

capacity by 30%.

Have you gained more profit from producing the flagpoles?

Yes of course, but not that much. The most important is the new technology.

What difficulties did you meet in connection to this partnership?

In the beginning it was very difficult due to difference in cultures. You need time to

understand each others cultures. But now it is ok. We can understand each other and we go to

parties every time.

How many jobs has the flagpole production provided?

There are now 40 people producing flagpoles. In the beginning in 2012 there were only 11

and 12 people and last year it increased to 40.

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Do you think this joint venture has a positive effect on the local society?

Yes. Because we recruit more new employees in the neighborhood. Workers also get trained

in new technology and using tools. Because our company invest a lot in infrastructure – last

year the company was flooded due to rain season so we had to increase the barriers.

Did the Danish partner invest a lot in this partnership (capital)?

The Danish partner sent engineer to train our employees. We also gained support from

Danida. It supported about 25-50%. However most money was spent on training in the

production line. We had to use our own money to pay for workers and everything.

Was there a good level of trust between you and the Danish partner?

Yes. I think we had good separate responsibilities. In Vietnam we take care of production and

the Danish partner takes care of sales. We have a very good cooperation.

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Appendix 9

Interview with VN5

August 2nd, 2013 HCMC

What is your background?

I have worked in VN5 for 2 years as project manager. I take care of customers from the Joint

venture with the Danish company. This was made in 2003 so it has existed for 10 years.

How many years have this company existed?

It started 25 years ago. 10 years ago the director of our company met with the director of the

Danish company for making mold. We make mold and plastic. The IJV only makes mold and

sells it. The IJV is about to build a new factory which will open next year so they will have 2

factories. We have many international customers. 90% are international and 10% domestic.

What does your company produce?

Mold and plastic. We make complete solutions for our clients. There is a lot of pressure from

customers cause our products are tailor made for them. However the profit is low. As an

example: This plastic ball we get 0.3 USD for making and they sell it for a market value of 5

USD. They have a higher risk than us, but we have a small profit.

How many employees do you have? How many did you have 4 years ago?

About 150. Has increased every year. In the JV there are about 100.

In our new factory the capacity is 400-500 people, but we only had this factory for 1 year so

there is still a long way to go.

Can you tell a little bit about the joint venture you had/have with the Danish partner?

VN5 has learned a lot from our Danish partner. Both the system and the way they work. The

skills. Also another benefit we gained was access to many customers – Danish and European

customers. They introduce customers to us. Sometimes they make the mold at the IJV and we

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make the production at VN5. They do not produce anything with plastic at the IJV. They only

make the molds.

Was this your first joint venture?

Yes. The first and only. The ownership division is 50/50.

Did you start using new technology after the joint venture?

Yes of course. When the Danish company visited VN5 the first time they saw that we had

potential. A Joint venture for 10 years is a very long time. We mainly learned about the

technology for mold making, management and control systems – e.g. quality control.

How about training?

When we opened the IJV a lot of experts came from Denmark to teach us more about making

mold. The software and communication was in English so our employees also improved their

English a lot. VN5 received no funding from Danida, but the Vietnamese government gave our

IJV tax exemption for 5 years.

How did the partnership start?

The Danish director came to Vietnam and asked VN5 to design a new mold in order to test

VN5. The Dane saw the potential and wanted to make IJV with VN5.

How is the Joint Venture managed?

The Joint venture is run by 2 people. 1 Dane and 1 Vietnamese. The general director is

Vietnamese and the Dane is chairman. The Dane is only in Vietnam few month every year. The

Danish chairman takes care of all customers from EU and the Vietnamese director manages

operations. We also had customers from Germany and Denmark before 2003. We also have

customers from Japan, Australia, USA. We have 10-20 in Germany. Our biggest market is

Europe.

Have you introduced new activities in your business such as marketing or design which

you did not have before the partnership?

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We also assemble products. It depends on the requirements of our customers. VN5 is a total

solution company. We make everything. Customers just need to provide a sample and we

make everything. For example we make this dog toy – we buy the ball and produce the grip.

Then we put it in package, box it and ship it.

We have learned a few new techniques – system control. We are in different sections. The IJV

makes smaller parts. The IJV makes 80% of their molding projects for Lego. They ship the

mold. We had a designer from Lego here in one of our offices for 1 year. We cannot do

marketing ourselves. All our customers come to us. For instance, the Danish chairman of the

IJV speaks at different events about mold making which brings in customers.

Have you recently moved into new sectors or markets?

No. We have stayed in mold and plastic for 25 years.

What difficulties did you meet in connection to this partnership?

I think in every JV the profit is always an issue. Both partners want more profit and they want

to use it differently, but our director handles it well. It is very equal. The Danish and

Vietnamese directors are very close friends. The director flies to Denmark 2-3 times a year

and even attended the Danish director’s son’s wedding. They also go travelling together.

Do you think this joint venture has a positive effect on the local society?

They use 2 Danish employees in the IJV as project managers. They help to improve the skills

for Vietnamese employees. Besides that I do not see many benefits for the local society. The

Danish company does no marketing in Vietnam, only cheap production. However, it also helps

Vietnamese suppliers as the IJV sometimes buy steel and other materials.

Is the factory job of mold making not a difficult job?

Yes. It requires a lot of training to make the mold. Mold making is a very difficult job. It

depends on their position whether they are educated. Either they are educated or have prior

work experience.

In Vietnam, many people leave school early.

It is mainly the designers who need an education. We have 7 designers in VN5. Some of them

worked for the IJV before and the other way around. So we do exchange employees a little bit.

I can see on your business card that VN5 also does R&D?

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Yes, we have an R&D department here. We had it for about 5 years. We want to develop our

own products in the future. Now we only make products for other companies. In some years

we will make our own products. We already have the R&D department for making mold and

samples.

What kind of projects do you do as project manager here?

We are 3 project managers with 20 customers divided between us. I take care of 5-6

customers. The projects are about plastic production.

What do you find to be the explanation that VN5 has been so successful?

Mainly because we don’t sell own products and therefore the crisis had no effect on us. Now

during the crisis customers want to create new products to get out of the crisis. So we have

many orders now. We even have to decline many customers because we don’t have enough

capacity.

Did you obtain quality assurance certificates?

Yes. We have the ISO 9001:2008. We have 2 factories. This is the new one. The ISO 9001

proves that the company has a quality system. All customers ask for ISO. The ISO 2003 is the

older version. It does not count for anything now.

Did you also have the earlier version?

We also had the ISO 2003.

So it was not due to the Joint venture that you got ISO 9001:2008?

No

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Appendix 10

Interview with Danish embassy in Vietnam

11th of July, 2013 Hanoi

What is your background?

Economic background. I have worked here for 14 years.

Has the B2B program been a success in Vietnam?

It has been successful in the sense that we have supported with almost 71 million USD since

1997. There have been around 310 projects and 150 partnerships. The amount of grants and

partnerships as well as improved skills for Vietnamese is a success.

Why has many of the partnerships failed?

Often the companies find out along the way that they have different visions. Others were hit

very hard by the crisis. So far the program only exist in the big cities in Vietnam. In the rural

areas the language barrier is too big.

How do you monitor the program?

We monitor the process very closely. If it goes well we only visit 2 times a year. They have to

submit bi-annually report. We have a milestone monitor which we use to measure project

performance. Besides we often have meeting with the local and Danish partner to see if they

have mutual understanding. Our milestone monitor includes:

Growth turnover – see how viable sales is

Investment amount in joint venture

Amount of investment in local environment and working environment.

Number of new jobs created

How many CFO’s from local company participate in JV

CSR activities

In which way, has the Vietnamese partner companies in your opinion benefitted from

the program?

They have benefitted from technology transfer so they can improve products and profitability.

They gain access to foreign markets – at least the Danish. They have more capital for

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investment in the company, more environmental friendly equipment. They can improve

management style and skills and increase competitiveness. They can create better working

environments.

Sometimes the local company also participates in CSR activities. Sometimes Danida also

welcomes the local staff to participate in different seminars at the embassy.

How do you measure the performance improvement of the local companies?

The only thing we measure is growth turnover increase because there are many different

industries and we are not experts in measuring improvement in these.

In which ways have Danish companies benefitted from the programme?

They can benefit from reduced cost of the new product. Access to cheaper raw material, cheap

and high skilled labor. Sometimes they also access to local market if price is acceptable. Many

companies left due to the financial crisis. They wanted to maintain their business in Denmark

instead. Some of them have cultural barriers and decide to turn down the business.

Sometimes business regulations and rules are not clear. Sometimes they cannot obtain the

documents they need.

Why did the program change in 2011 to Business partnership programme?

We want to focus more on green growth and clean tech for support and development. We also

do public private partnerships now. This means that either the Vietnamese or Danish

company can be public institution such as university, state owned company or research

institution. In the North we have 1 project involving collecting and solving solid waste.

What are the differences between the B2B program and the new program?

The partnership model.

Increased support for green growth

We also look for financial ensurement. There can also be supplementary partners now who

support with engineering or technically. One DK partner can be main partner and university

can be supplementary partner.

Which problems have you faced with the program?

Mainly the cultural barrier. Once a year we have partnership gathering on how to tackle local

partner. The local partner often has very short term vision whereas the Danish partner has

more long term perspective. We also spend a lot of time at the embassy on helping out with

legal advice as well as assisting on filling out the many templates. That is very time consuming

for the embassy to explain and later implement.

How do you attract Vietnamese companies to participate in the program?

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Every year we have seminar and we use the media to advertise for the program. The local

companies are fast to know where the new growth and technology is.

How do you attract Danish companies to participate in the program

Whenever there is a new partnership we brand it on our webpage and make a story about it

on the web page to show other companies if they have a good story. We do a lot of PR based

on show case. The ministry of foreign affairs organize a meeting every year and contact

companies from relevant sectors. They also post stories of successful partnerships on their

webpage and in their magazines.

What was the intention behind the Danida B2B program?

Overall objective is to support sustainable development and promote green growth. To

contribute to poverty reduction, working environment and CSR as well as increased

employment. In Vietnam we only support the sectors which have potential for export. In the

past we supported almost all sectors, but currently we support less. The B2B programme also

involves Water sector program support, agricultural sector support, business sector program

support etc. We try to have good synergy with all sectors and try not to overlap Danida’s

support. Now it is also a requirement to maintain jobs in Denmark at the same time.

How does the B2B program affect the local population?

When we create growth we reduce poverty by increasing income in local companies. This

means increased income for locals. In addition, we increase occupational safety and HIV

awareness.

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Appendix 11

Interview with VN6

14th of June, 2013 CPH

Could you start by telling a bit about your Joint venture i Vietnam ?

We have 5 year aniversary in July and we have a very good business in Vietnam. We have

more than 50 employees in Vietnam in the graphical production industry

Why did you choose Vietnam?

We had researched Bangladesh beforehand where we could get engaged local employees, but

it is much more difficult to send expatriates to Bangladesh. Many of our expatriates to

Vietnam have been very happy to be there and many of them are married to locals now.

Vietnam is an interesting Tiger economy going full speed. The population is very ambitious

and its also an advantage that the alphabet is similar to ours.

Did you sent Danish expatriates to the IJV?

Yes, about 2-3. Not only Danes but also people from other countries as we are an international

company. Quality and cultural understanding for our European customers is very important.

We have implemented 100% Danish management style as well as Danish CSR and so forth.

Our local partner has been paramount in regards to hiring local employees and also about

Vietnamese legislation. We run the business in Danish business style now, but in the

beginning you have to listen to the locals in order to learn about the Vietnamese ways of doing

business.

What is the ownership division in your IJV?

It is 50/50. This is due to the Danish Embassy in Vietnam which had a rule at that time about

50/50 ownership division. Since then they have realized that it is not the appropriate way to

do it.

What do you find to be the main reasons that your company was able to become

successful when so many others have failed?

It was not until March last year that we started making profit. I find that there are 2 main

reasons for our success. The first one is management. We hired expatriate Danish

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management on fulltime after different experiences. It is simply not possible to hire

management with the same level of experience in Vietnam. The second reason is the

employees. They have been really great and we had a low level of employee turn around. In

our business it is very important that the know-how stays within the company and we need

employees to stay in the company. This is a common issue in Asia, but the local management

has succeeded in creating an organizational culture where the employees feel like staying.

Did you transfer technology to your Vietnamese partner?

We are a heavy weight technology company. Everything from our business in Denmark has

been transferred to our Joint venture and today our Vietnamese company is on the same level

as a European one. They also manage local customers and are 100% independent.

Did you train your Vietnamese partner?

We have spent a lot of energy traning our employees. For the first 2 years we have had 2 full

time educators primarily educating in software design and techniques. We have also provided

free English education. In cooperation with Danida we also implemented many CSR programs

such as sexual education and so forth.

How did the partner selection take place? Why did you choose this partner?

We spent 1 ½ year on partner selection. We met with many different people and companies

and were close to settle different partnerships, but had to acknowledge that they would not

work out after all.

It was not especially the company as such- It was an advertisement company so they did have

some understanding for the business. However, it was primarily their professional

qualifications and ability to raise capital which appealed to us. They have many ambitious

employees with a strong educational background – many of them were educated abroad.

What challenges have you faced with this partnership?

The greatest challenge has been local management. There are great cultural differences. Joint

management was not a success. As for daily challenges the Vietnamese employee mentality

has been an issue. It is a YES culture. They do not want to take responsibility and are used to

taking orders. It is almost impossible to find people with the proper educational level so we

have had to educate everyone. We run a school for young and underprivileged people and

thereby create a recruitment basis and also provide us with a possibility to educate the young

people from the beginning.

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Did you benefit from your activities in Vietnam?

It has been a growth engine for our company. It has increased the company’s competitive

advantage in order to survive in a tough market. It has saved many Danish jobs.

Are your activities in Vietnam different from your activities in Denmark?

No. The activities are the same and even broader in Vietnam as this market is in growth.

Do you believe that your IJV has had a positive influence on the local society?

We have experienced several employees who have become entrepreneurs as designers.

Several of them have created their own companies and also the ones we educate from our

school. It is an entrepreneural culture so providing them with some few skills can have a great

influence on their future.

CSR creates good ethics and morals and we run the company by Danish norms. This way we

export the Danish management style which is more healthy than the Vietnamese. It helps

impose regulations on the Vietnamese companies which our employees start up themselves.

How do you think you have influenced your local partner?

Our partner has run their own company next to the joint venture. They run a couple of

businesses which are successful.

In which ways have regulations and policies of the Vietnamese government influenced

your activities in Vietnam?

Great challenges! They have made many decisions which have been horrible for businesses.

For instance they made one regulation that all foreign companies should have Vietnamese

management within 6 months. Vietnam is very dependent on foreign investment and this is

not exactly the way to create it. In this area we have been very dependent on our local partner

which has been able to guide us through these legislations. It is less challenging for a company

like ours which trades though the internet compared to import export companies.

In which ways have Danida’s regulations and policies influenced your activities in

Vietnam?

It has been very reasonable. We would never have started this joint venture without Danida

and B2B. There has only been one catastrophe which is the 50/50 ownership demand. There

has been many companies which did not make it due to this rule. The Danida CSR programs

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has been a great success. Sometimes we did not see the point in the beginning, but then it

turned out to be very beneficial for our employees and help strengthen employee satisfaction.

Is this your first IJV?

Yes

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Appendix 13

Interview with VN7

28th of May, 2013 CPH

Could you start by telling a bit about your prior joint venture?

It lasted 3-4 years. It started because the wages are very high in Denmark for IT employees.

The JV in Vietnam would give us the possibility to supply Danish employees with employees

in Vietnam which would give us the chance to win more projects as we would be able to

provide it at lower cost.

Why did you choose Vietnam?

First and foremost because of their high educational level. The Vietnamese cares a lot about

giving their children a good education – often abroad in Australia and America. Unlike many

other nationalities the Vietnamese return to use their education in Vietnam. In some areas

there were a lot of candidates for our jobs and in some areas there were none so we had to

educate them.

Did you sent Danish expatriates to the IJV?

Yes. We sent entire families. However we had some problems with the first project manager

we sent. He did not treat the Vietnamese employees very well and he had to return after a

year. Since then we had a Vietnamese manager. We would take turns to go visit from Denmark

about every 3rd month.

What was the ownership division in your joint venture?

It was 50/50 which cause a lot of problems. There were times when we were not able to make

any decisions. The Vietnamese partner was not used to work like we do with board meeting

and so forth. They did not respect a written contract the same way we do or live up to

decisions made on meetings. They had a completely different management culture.

Did you transfer technology to your Vietnamese partner?

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We transferred a lot of know-how to their people and we built the entire project. We are all

very well-educated and have had experience from many big projects so we have a clear

management style for how to carry out projects. Part of the purpose was to heighten the

educational level which was done by learning from our past experience, but also through

education in for instance English. Most educated Vietnamese can read and write English but

they cannot speak it. We sent everyone on an English course at the local university. That was

excellent. We were now able to communicate with them through skype and so forth. 20-30

people took this course.

Did you train your Vietnamese partner?

We bought all equipment down there, but we built it up from the beginning.

In which other ways have you supported your Vietnamese partner?

Through CSR projects. We had a course in sexual education for both sexes as well as education

on cooperation. We also provided support for further education.

We also hired handicapped people. If you are handicapped in Vietnam you are not able to go

anywhere. There are not roads for wheel chairs. Many people become handicapped in

Vietnam when they crash on their scooters. We picked up our handicapped employees and

brought them home every day.

How did the partner selection take place? Why did you choose this company?

They had 400 employees and we were allowed to recruit employees internally. We would

make job descriptions and they would bring suited candidates. They educated people in IT so

we found them to be a good match.

What difficulties have you faced with this partnership?

It went very well on the daily basis. People showed up for their job every day and we had a

good dialog with the employees. The problem was between the shareholders. There was a

financial crisis in Vietnam 2 years ago. The IT bubble burst and our partner went bankrupt.

They disappeared with our money. Our Danish customer ended our project as it became

delayed. The project was VACASOL – a webpage where you can rent out your place to

foreigners going on vacation.

Our partner firm was educating people in IT. They went bankrupt with 400 employees. In

Denmark you can go bankrupt and life can go on, but in Vietnam you almost go to jail. We

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ended up buying the project ourselves and sold it to another company. The project is

successful today.

In which ways do you feel that culture has influenced the partnership?

We had a good chemistry with the employees. They were happy with what we did for them –

the CSR projects and so forth. They also enjoyed that there was less hierarchy than what they

are used to in Vietnamese companies. On problem was that the Vietnamese never say no. They

will always say they can do a task even if they cant.

Have you benefitted from your activities in Vietnam?

Yes. We have established a lot of relations down there that we often use for different projects.

We have found very competent Vietnamese companies which can deliver to us in good quality.

We probably have work for 10-12 people full-time in Vietnam.

Are your activities in Vietnam different from your activities in Denmark?

Yes. In Denmark our employees visit customers every day. In Vietnam they only did office

work that was sent to them from Denmark. Not very difficult or individual projects.

Do you believe that your IJV has had a positive influence on the local society?

Besides the regular employees who benefitted from CSR projects, training and so forth we

also hired people for lunch and so forth. Service probably created 5-6 jobs. Also benefitted the

local university from the English education. In addition, many of the people who left us went

out to get better jobs with higher wages after we had trained them.

How do you think you have influenced your local partner?

I do not think that the local company benefitted so much from this. The employees would

usually get hired by a 3rd company after leaving us. We never had a profit in our joint venture

so they also did not benefit from that. However, I think they had some benefit from using us as

reference to make deals with foreign customers. They would often bring foreign customers to

meet us. In addition, we had very nice offices compared to theirs. In the beginning the joint

venture was not made so make money on but was building a system for this Vacasol project.

After completing this the goal was to start making money on other projects.

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In which ways have regulations and policies of the Vietnamese government influenced

your activities in Vietnam?

Great problems with corruption in Vietnam. It is completely forbidden. However, it is so

corrupt that it can be very difficult to make deals without it, especially when dealing with the

state. However, we always turned down. In addition, they have this pension system in

Vietnam where each employee have a book with stamps of how many years they have worked.

These books tended to “get lost” whenever our local manager wanted to treat the employees

somehow – we later found out.

Vietnam is a so-called communist land, however it is very liberal and its easy to start a

company there.

In which ways have Danida’s regulations and policies influenced your activities in

Vietnam?

Part of Danida’s policy is more equal gender distribution which made us hire more women.

However, there has been problems with hiring women as after the New Year’s holiday (Tet)

they would often not return as their family’s suddenly found it about time for them to get

married. This way we lost some well-educated employees.

The policy was also that we had to make a joint venture. Danida told us about the CSR projects

which our employees really benefitted from. Danida more made proposals than actual

demands..

Is this your first international joint venture?

Yes. First for the company, but I had some prior experiences

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Appendix 14

DANIDA

Danida is a division in the Danish Ministry of Foreign affairs which handles foreign

development aid. Danida was established in 1962 under a different name when Denmark

begun its first bilateral development assistance programme. In 1990’s it became part of the

Ministry of Foreign Affairs in, which made Danish development assistance a greater part of

Danish foreign affairs agenda and policies. Since the 1970’s Danish development assistance

has had a great focus on poverty and has mainly supported the poorest countries in the world.

In the 1980’s, human rights, environment and gender equality also became an important part

of the Danish development agenda. In the new century, after 9/11, the fight against terrorism,

support to conflict solution and improvement of good governance also became integrated in

the Danish development assistance for instance with increased support to Afghanistan and

Iraq. In 2012 with the government change, Danida got a new strategy called “A right to a

better life”. At the heart of this strategy is the goal to fight poverty and secure human rights.

Danida aims to fight poverty with increased growth – especially green growth and by

enforcing human rights such as food, school, protection and so forth. Danida has 24 priority

countries which they cooperate with which are divided on 14 in Asia and Middle East, 9 in

Africa and 1 in South America. The aim of only supporting few countries is to be able to carry

out long term goals. In 2011, Denmark paid 0.85% of GDP in development aid. This was

divided as 74% given as bilateral aid while 26% was given as multilateral aid primarily

through EU, UN and World Bank (Danida, 2011).

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Appendix 15

Danida’s B2B programme in practice

With the development from the PSD program to B2B a lot more focus was put on the

introductory phase in order to increase the partner’s knowledge of each other before the

beginning of the project (Danida, 2006a). A B2B project is divided in 3 phases: Contact phase,

pilot phase and project phase. In the contact phase Danida assists in identifying a partner. The

Danish partner will go on introductory visits until a suitable partner has been found. It is also

mandatory that at least one visit involves the local partner visiting the Danish partner

company in Denmark. After the partner has been found, a “Get to know your partner”

workshop will be held. In the pilot phase the commercial basis and opportunities for the joint

venture will be explored and potential necessary training sessions will be planned. In the last

phase, the project phase, the planned project will be implemented and different measures of

CSR will be carried out such as technology transfer, training sessions and so forth. The Danish

partner companies can receive up to 5 million DKK through a period of 3-4 years (Danida,

2010). Participating companies must comply with national work environment regulation as

well as the ILO declaration on fundamental principles and rights at work which includes

abolition of child labour and forced labour as well as the right for workers to create or join

workers’ organizations and bargain collectively. Danish companies are also encouraged to

raise awareness about occupational health and safety (OHS), and to implement protective

measures. In addition, companies must comply with the Danida anti-corruption code of

conduct which follows zero tolerance policy towards corruption (Danida, 2006b). Both the

Danish and Vietnamese company participating must be financially sound and possess the

resources to invest in this project. The Danish company must also be of substantial size and

have experience enough to be able to train employees in the Vietnamese partner company. In

order to conduct technological transfer and training of the local company, the Danish

company must send employees to the joint venture to assist in day-to-day operations. In some

cases training can also take place at the Danish company in Denmark. In the contact, pilot and

project phase the Danish company must submit quarterly reports describing the development

of the project, and a final report at the end of the project phase. After project implementation

the Danish company must submit a report once a year, and also up to 3 years after the B2B

support has expired (Danida, 2010).

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Companies participating in Danida’s B2B program have often complementary been

supplemented with assistance from IFU. IFU was established as a non-profit institution under

the Ministry of Foreign Affairs in 1967. IFU has been created to promote investment in

developing countries in collaboration with Danish trade and investment (Danida, 2006c). IFU

invests in Danish companies entering developing country markets and assist them in this.

(Danida, 2004).

B2B in Vietnam

Vietnam has been one of Danida’s programme countries since 1993. Vietnam was chosen due

to its high poverty rate, yet showing will and ability to long term development. Around 2005

Danida established a 5 year strategy for development assistance to Vietnam between 2006

and 2010. This strategy was based on Vietnam’s own strategic development plan also to be

carried out in this period. The overall goal of Danida’s strategy was to increase economic

growth through private sector led development and decrease poverty. In addition, when

Danish development aid to Vietnam between 1993 and 2000 was evaluated, if was found that

more emphasis should be put on poverty alleviation as well as good governance and gender

equality and HIV prevention measures which was given top priorities in the new strategy.

Danida also specifically targeted support to sustainable production in the fisheries and

agricultural sector (Danida, 2006d).